{
  "title": "Do Industrial Policies Increase Trade Competitiveness?",
  "publication": "IMF Working Papers, May 23, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184",
  "overlayPath": "/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184/index.md",
  "summary": "Industrial policies (IPs) are on the rise. The most common motive for pursuing IPs is to boost strategic competitiveness of the targeted products.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Industrial policies (IPs) are on the rise and are most commonly motivated by boosting strategic competitiveness of targeted products.\n- The paper leverages a novel database of industrial policies and uses the local projection difference-in-differences approach to examine the dynamic relationship between IPs and trade competitiveness.\n- Results point to a nuanced picture with heterogeneous effects across product types and policy instruments."
    },
    {
      "heading": "Methodology",
      "content": "- Data sources: novel database of industrial policies (as described in the paper).\n- Empirical approach: local projection difference-in-differences."
    },
    {
      "heading": "Key findings",
      "content": "- Average effect:\n  - On average, products targeted by IPs experience a larger increase in competitiveness than non-targeted products.\n  - The average effect is driven by initially competitive products.\n- Heterogeneity across policy instruments:\n  - Domestic subsidies are associated with a temporary improvement in trade competitiveness in the short term.\n  - Export incentives are linked to medium-term improvements in competitiveness.\n- Value chain spillovers:\n  - Evidence for three value chains—solar photo-voltaic, wind turbines, and electric vehicles—suggests IPs can have spillover effects on non-targeted products through value chain linkages.\n  - IPs targeting upstream products are associated with larger improvements in the RCA of products using these upstream products relative to IPs targeting products at the same value chain stage."
    },
    {
      "heading": "Policy implications and considerations",
      "content": "- Policymakers should account for heterogeneity in outcomes by product initial competitiveness when designing IPs.\n- Choice of instrument matters:\n  - Domestic subsidies may yield short-term competitiveness gains but appear temporary.\n  - Export incentives may be more effective for medium-term competitiveness improvements.\n- Consideration of value chain positions:\n  - Targeting upstream products can generate larger spillovers to downstream products’ revealed comparative advantage (RCA) than targeting products at the same value chain stage."
    },
    {
      "heading": "Keywords and subjects emphasized",
      "content": "- Subjects: Comparative advantage, Competition, Export subsidies, Exports, Financial markets, International trade.\n- Keywords: Comparative advantage, Competition, domestic subsidies, effect of IP, export incentives, Export subsidies, Exports, Global, Green product, Industrial policies, local projection difference-in-differences, RCA measure, RCA of product, revealed comparative advantage, targeted product, trade, upstream product.\n\nIMF Working Paper No. 2025/098, May 23, 2025.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184/bundle-manifest.json)",
    "Authors: Yueling Huang, Sandra Baquie, Florence Jaumotte, Jaden Kim, Yucheng Lu, Rafael Machado Parente, Samuel Pienknagura",
    "Published: May 23, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229012157.001",
    "Industrial policies (IPs) are on the rise and are most commonly motivated by boosting strategic competitiveness of targeted products.",
    "The paper leverages a novel database of industrial policies and uses the local projection difference-in-differences approach to examine the dynamic relationship between IPs and trade competitiveness.",
    "Results point to a nuanced picture with heterogeneous effects across product types and policy instruments.",
    "Data sources: novel database of industrial policies (as described in the paper).",
    "Empirical approach: local projection difference-in-differences.",
    "Average effect:",
    "Heterogeneity across policy instruments:",
    "Value chain spillovers:",
    "Policymakers should account for heterogeneity in outcomes by product initial competitiveness when designing IPs.",
    "Choice of instrument matters:",
    "Consideration of value chain positions:",
    "Subjects: Comparative advantage, Competition, Export subsidies, Exports, Financial markets, International trade.",
    "Keywords: Comparative advantage, Competition, domestic subsidies, effect of IP, export incentives, Export subsidies, Exports, Global, Green product, Industrial policies, local projection difference-in-differences, RCA measure, RCA of product, revealed comparative advantage, targeted product, trade, upstream product.",
    "**Working Paper**"
  ],
  "related": [
    {
      "title": "Working Paper",
      "role": "paper",
      "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025098-print-pdf.pdf",
      "summary": {
        "path": "/-/media/files/publications/wp/2025/english/wpiea2025098-print-pdf.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/files/publications/wp/2025/english/wpiea2025098-print-pdf.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184/index.md",
    "json": "/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184/index.json",
    "bundleManifest": "/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T01:43:24.772Z"
}