Industrial Policy: A Tale Of Innovators, Champions, And B52s

this paper argues against what probably is the most extreme type of so-called 'Vertical' industrial policy, that is, support for national or European champions. It also critically reviews the rationale for one of the economically most appealing so-called 'Horizontal' industrial policies, that is, support for research and development. Although not disputing that there is a rationale for such support, the authors reason that it is not as strong as commonly assumed. In this context, they find that while competition is key for spurring innovation and growth, there is room for industrial policy - interestingly enough, not so much to encourage firms to extend the technological frontier, but to catch up with it.