Editing Industrial policy (section)

== Debates on process ==
Despite criticism, there is a consensus in recent development theory that says state interventions may be necessary when [[market failures]] occur.{{sfn|Rodrik|2009}} Market failures often exist in the form of [[externalities]] and [[natural monopolies]]. Some economists argue that public action can boost certain development factors "beyond what market forces on their own would generate."{{sfn|Rodrik|2004|p=1. "Perhaps not surprisingly, this recognition is now particularly evident in those parts of the world where market-oriented reforms were taken the farthest and the disappointment about the outcomes is correspondingly the greatest – notably in Latin America" }} In practice, these interventions are often aimed at regulating networks, public [[infrastructure]], [[R&D]] or correcting [[information asymmetries]]. Many countries are now seeing a revival of industrial policy.<ref>{{cite news |title=Many countries are seeing a revival of industrial policy |url=https://www.economist.com/special-report/2022/01/10/many-countries-are-seeing-a-revival-of-industrial-policy |newspaper=[[The Economist]] }}</ref>

One question is which kinds of industrial policy are most effective in promoting economic development. For example, economists debate whether developing countries should focus on their comparative advantage by promoting mostly resource- and labor-intensive products and services, or invest in higher-productivity industries, which may only become competitive in the longer term.{{sfn|Lin|Chang|2009}}

Debate also surrounds the issue of whether government failures are more pervasive and severe than market failures.{{sfn|Khan|2003}} Some argue that the lower the government accountability and capabilities, the higher the risk of political capture of industrial policies, which may be economically more harmful than existing market failures.{{sfn|Kaufmann|Krause|2009}}

Of particular relevance for developing countries are the conditions under which industrial policies may also contribute to poverty reduction, such as a focus on specific industries or the promotion of linkages between larger companies and smaller local enterprises.{{sfn|Altenburg|2011}}