Industrial Policy Instrument

An Industrial Policy Instrument is a policy instrument that enables government intervention to support industrial development objectives through targeted economic measures.

• AKA: Industrial Development Tool, Manufacturing Policy Instrument, Sectoral Policy Tool, Industrial Intervention Mechanism.
• Context:
  • It can typically promote Strategic Industry Development through selective support mechanisms.
  • It can typically enhance Manufacturing Competitiveness via targeted interventions.
  • It can typically facilitate Technology Transfer through incentive structures.
  • It can typically support Infant Industry Protection with temporary measures.
  • It can typically encourage Industrial Upgrading through performance requirements.
  • ...
  • It can often create Market Distortions through selective treatment.
  • It can often generate Rent-Seeking Behavior from protected industries.
  • It can often require Administrative Capacity for effective implementation.
  • It can often conflict with Free Trade Principles in international agreements.
  • ...
  • It can range from being a Direct Industrial Policy Instrument to being an Indirect Industrial Policy Instrument, depending on its intervention method.
  • It can range from being a Horizontal Industrial Policy Instrument to being a Vertical Industrial Policy Instrument, depending on its sectoral focus.
  • ...
  • It can implement Production Subsidies for cost reduction.
  • It can provide R&D Tax Credits for innovation incentives.
  • It can establish Local Content Requirements for domestic linkages.
  • It can create Industrial Zones for infrastructure provision.
  • It can offer Export Finance for international competitiveness.
  • ...
• Example(s):
  • Financial Industrial Policy Instruments, such as:
    • Development Bank Lending for long-term finance.
    • Investment Tax Credit for capital formation.
    • Export Credit Guarantee for trade promotion.
  • Regulatory Industrial Policy Instruments, such as:
    • Performance Requirement for technology upgrade.
    • Import Licensing for selective protection.
    • Technical Standard for quality improvement.
  • Infrastructure Industrial Policy Instruments, such as:
    • Industrial Park Development for cluster formation.
    • Technology Incubator for startup support.
    • Skills Training Program for human capital development.
  • Trade-Related Industrial Policy Instruments, such as:
    • Tariff Escalation Strategy for value chain development.
    • Export Processing Zone for export diversification.
  • ...
• Counter-Example(s):
  • Monetary Policy Instrument, which targets macroeconomic stability rather than industrial structure.
  • Social Policy Instrument, which addresses welfare objectives rather than industrial development.
  • Environmental Policy Instrument, which focuses on ecological protection rather than industrial promotion.
• See: Policy Instrument, Industrial Policy, Economic Development Tool, Strategic Trade Policy, Import Substitution Industrialization, Export-Oriented Industrialization, Developmental State Policy.

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