Industrial policy (IP) is one of the most controversial issues in economics. This chapter provides a concise but comprehensive discussion of this concept in the context of developing countries. The chapter begins by describing the different possible definitions of IP. Next it presents the economic arguments against and in favour of IP. The chapter then describes the characteristics of the various models of IP historically adopted by developing countries and discusses them in a comparative perspective. The performances of IP in the different historical periods, regions, and countries are compared and some explanations for their different results are suggested. Next, the chapter discusses how the changes in the rules of world trade and in the international division of labour have influenced the design and implementation of IP. Finally, elements of the so-called “new industrial policy” are discussed. The last section summarizes and provides some suggestions for future research.
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