Directorate for Science, Technology and Innovation
Are industrial policy instruments effective?
A review of the evidence in OECD countries
While the case for industrial policy is gaining traction across OECD countries, little
consensus exists on the effectiveness of such interventions. Building on a new analytical
framework for industrial policy developed in a companion paper, this paper reviews
the empirical literature on the effectiveness of industrial policy instruments, laying
out the knowns and unknowns. Overall, it strongly supports the premise that well-designed
economic incentives for firms and good framework conditions shaping the business environment
are effective. At the same time, it emphasises the limited and inconclusive nature
of the evidence regarding the increasingly frequent targeted and demand-side instruments.
Finally, it underlines the complementarities between economic incentives and other
interventions such as skill policies or framework conditions, notably competition
and trade policies. Framework conditions are indeed key in enabling the most productive
firms to grow and an important channel for structural change.