Industrial Policy: A Policy Menu

People in countries around the world would prefer to live in a a growing economy with opportunities for good jobs. Thus, it’s unsurprising that governments around the world would like to enact policies to deliver such outcomes. But industrial policy is hard: after all, if it was easy for governments to legislate prosperity, then there would be a lot less poverty and inequality in the world. Policies that favor one sector often involve costs both to the government and to other disfavored sectors. Ana Margarida Fernandes and Tristan Reed provide a menu of 15 industrial policy tools, and how and when they are more or less likely to work, in Industrial Policy for Development: Approaches in the 21st Century (World Bank, April 2026). Here is their menu: You will notice that the possibilities are divided into first-rank and second-rank, where the second-rank choices specify that they only make sense when an other option is not available. The authors make very clear that they are not…