Industrial policies and capabilities for catching up: Frameworks and paradigms

Employment Working Paper No. 77

After the crisis, interest in industrial policy, productive transformation and catch-up growth have made a remarkable comeback both in academic circles and in the policies of governments in many developing countries. It is now a good time to revisit the industrial policy debate, and to promote a more sophisticated understanding of the institutional, informational and political economy balances necessary for productive transformation policies to be successful. This paper evaluates the different economic frameworks for analysis and design of industrial and productive transformation policies with a view to promoting a dynamic and high-performing catching-up process. The analysis suggests the need to frame industrial policies within a dynamic and wider concept of productive transformation, which is linking structural changes in production and employment with the accumulation of domestic capabilities. This approach embeds industrial policies as an essential part of the development agenda.