Effective industrial policies require strong institutions from "summary" of The Industrial Policy Revolution II by J. Esteban,J. Stiglitz,Justin Lin Yifu
Industrial policies are crucial for promoting economic development and structural transformation in developing countries. However, implementing effective industrial policies requires more than just good intentions; it also necessitates the presence of strong institutions. Strong institutions play a critical role in the success of industrial policies by providing a stable and predictable environment for businesses to operate in. Institutions act as the rules of the game that govern economic activities, shaping incentives for firms and individuals. Without strong institutions in place, industrial policies may be susceptible to corruption, rent-seeking, and inefficiency. For instance, weak institutions can lead to regulatory capture, where vested interests influence policy decisions to benefit themselves rather than the broader economy. This can undermine the effectiveness of industrial ...
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