Research and Writing

Codification, Technology Absorption, and the Globalization of the Industrial Revolution

Réka Juhász, Shogo Sakabe, and David Weinstein

This paper studies technology absorption worldwide in the late nineteenth century. We construct several novel datasets to test the idea that the codification of technical knowledge in the vernacular was necessary for countries to absorb the technologies of the Industrial Revolution. We find that comparative advantage shifted to industries that could benefit from patents only in countries and colonies that had access to codified technical knowledge but not in other regions. Using the rapid and unprecedented codification of technical knowledge in Meiji Japan as a natural experiment, we show that this pattern appeared in Japan only after the Japanese government codified as much technical knowledge as what was available in Germany in 1870. Our findings shed new light on the frictions associated with technology diffusion and offer a novel take on why Meiji Japan was unique among non-Western countries in successfully industrializing during the first wave of globalization.

Industrial Policy in the Global Semiconductor Sector

Pinelopi Goldberg, Réka Juhász, Nathan Lane, Giulia Lo Forte, and Jeff Thurk

The resurgence of subsidies and industrial policies has raised concerns about their potential inefficiency and alignment with multilateral principles. Critics warn that such policies may divert resources to less efficient firms and provoke retaliatory measures from other countries, leading to a wasteful “subsidy race.” However, subsidies for sectors with inherent cross-border externalities can have positive global effects. This paper examines these issues within the semiconductor industry: a key driver of economic growth and innovation with potentially significant learning-by-doing and strategic importance due to its dual-use applications.

Our study aims to (1) document and quantify recent industrial policies in the global semiconductor sector, (2) explore the rationale behind these policies, and (3) evaluate their economic impacts, particularly their cross-border effects, and compatibility with multilateral principles. We employ historical analysis, natural language processing, and a model-based approach to measure government support and its impacts. Our findings indicate that government support has been vital for the industry’s growth, with subsidies being the primary form of support. They also highlight the importance of cross-border technology transfers through FDI, business and research collaborations, and technology licensing. China, despite significant subsidies, does not stand out as an outlier compared to other countries, given its market size.

Preliminary model estimates indicate that while learning-by-doing exists, it is smaller than commonly believed, with significant international spillovers. These spillovers likely reflect cross-country technology transfers and the role of fabless clients in disseminating knowledge globally through their interactions with foundries. Such cross-border spillovers are not merely accidental but result from deliberate actions by market participants that cannot be taken for granted. Firms may choose to share knowledge across borders or restrict access to frontier technology, thereby excluding certain countries. Future research will use model estimates to simulate the quantitative implications of subsidies and to explore the dynamics of a “subsidy race” in the semiconductor industry.

The Political Economy of Industrial Policy

Réka Juhász and Nathan Lane

We examine the ways in which political realities shape industrial policy through the lens of modern political economy. We consider two broad “governance constraints”: i) the political forces that shape how industrial policy is chosen and ii) the ways in which state capacity affects implementation. The framework of modern political economy suggests that government failure is not a necessary feature of industrial policy; rather, it is more likely to emerge when countries pursue industrial policies beyond their governance capacity constraints. As such, our political economy of industrial policy is not fatalist. Instead, it enables policymakers to constructively confront the challenges of policy design.

For the Journal of Economic Perspectives

Industrial Policy and the Great Divergence

Réka Juhász and Claudia Steinwender

We discuss recent work evaluating the role of the government in shaping the economy during the long 19th century, a practice we refer to as industrial policy. We show that states deployed a vast variety of different policies aimed at, primarily, but not exclusively, fostering industrialization. We discuss the thin, but growing literature that evaluates the economic effects of these policies. We highlight some fruitful avenues for future study.

For the Annual Review of Economics

The New Economics of Industrial Policy

Réka Juhász, Nathan Lane, and Dani Rodrik

We discuss the considerable literature that has developed in recent years providing rigorous evidence on how industrial policies work. This literature is a significant improvement over the earlier generation of empirical work, which was largely correlational and marred by interpretational problems. On the whole, the recent crop of papers offers a more positive take on industrial policy. We review the standard rationales and critiques of industrial policy and provide a broad overview of new empirical approaches to measurement. We discuss how the recent literature, paying close attention to measurement, causal inference, and economic structure, is offering a nuanced and contextual understanding of the effects of industrial policy. We re-evaluate the East Asian experience with industrial policy in light of recent results. Finally, we conclude by reviewing how industrial policy is being reshaped by a new understanding of governance, a richer set of policy instruments beyond subsidies, and the reality of de-industrialization.

For the Annual Review of Economics

The Who, What, When, and How of Industrial Policy: A Text-Based Approach

Réka Juhász, Nathan Lane, Emily Oehlsen,
and Verónica C. Pérez

This paper provides a new, text-based approach to measuring industrial policy. We take the tools of supervised machine learning to a comprehensive, English-language database of economic policy to construct measures of industrial policy at the country, industry, and year level. We use this data to establish four fundamental facts about global industrial policy from 2009 to 2020.

“Economics Must Catch Up on Industrial Policy” (Juhász and Lane) in The Debate Over Industrial Policy

From the Stigler Center/ProMarket’s volume on industrial policy.

More popular writing

  • “A New Economics of Industrial Policy” by Juhasz and Lane

    Industrial policy is back in advanced economies, but so are questions about its merits, drawbacks, and practicality. Yet these debates don’t address the wide variation in global practice, why policies succeed or fail, or which policies are feasible in the real world. Although new literature has started to update our empirical understanding of these policies, we argue that this “new economics of industrial policy” (Juhász, Lane, and Rodrik, forthcoming) calls for serious consideration of the political forces behind policymaking.

  • “Not a ‘side dish’: New industrial policy and competition” by Lane and Caffarra

    Industrial policy has returned as a major object of interest, with a proliferation of new thinking over the last five years by academics and practitioners (Rodrik et al. 2023). Questions around industrial policy have turned from ‘whether’ (i.e. ‘should governments carry out industrial policy?’) to ‘how’ (‘how should industrial policy be carried out?’).

  • "Economists Reconsider Industrial Policy" by Rodrik, Juhasz, & Lane

    “In the past, economists assessing the performance of industrial policies often focused on indicators such as import tariffs, capturing only limited dimensions of such measures and conflating their objectives with others. A new generation of research efforts takes a more productive approach – and reaches very different conclusions.”

  • “Economics Must Catch Up on Industrial Policy” by Juhász and Lane

  • “A Flight Plan That Fails” by Lane

    “At a time when governments are returning to industrial policy, we are largely clueless about how to make it work.”