Industrial policy in developing countries: overview and lessons from seven country cases

It is now widely accepted that the countries that managed to catch up with the old industrialised, high-income countries are the ones whose governments proactively promoted structural change. But industrial policies also frequently fail. The risk of failure is particularly high in latecomer countries, where bureaucracies are typically weak and political systems strongly rely on clientelism and patronage. This study explores the scope for and performance of industrial policies in seven low and lower-middle-income countries. It confirms that many industrial policies have failed, but also shows that in some cases, industrial policies have indeed accelerated structural transformation – even in political regimes with fairly strong authoritarian and clientelist traits, such as Tunisia, Vietnam, and Ethiopia.