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When and how should governments use industrial policy to direct innovation to specific sectors? Daniel Garcia-Macia and Alexandre Sollaci discuss a framework for analyzing the costs and benefits of industrial innovation policies, revealing that sector-specific fiscal support outperforms sector-neutral support only under stringent conditions while showing that most advanced economies, including China and the U.S., tend to over-subsidize innovation despite broadly targeting the right sectors.
Image courtesy of interviewee. November 13, 2024
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