Empirical Evidence on Industrial Policy using State Aid Data

Abstract

This paper provides evidence of the evolution of industrial policy in European countries through a detailed analysis of state aid data. We show the emergence of a new phase of industrial policy in the years 2000–2004. The two previous phases were respectively an ‘interventionist’ phase, whereby national champions were directly and strongly supported, and a ‘liberal’ phase where industrial policy meant providing the conditions for the competitiveness of industry, in the sense of only defining the rules of the competitive game. The new phase can be called ‘pragmatic’. The reason for such a term is that industrial policy implemented today is somewhere in between the two extremes constituted by the previous two phases, the rules of the game still being emphasised but some vertical industrial policy measures being envisaged where necessary. In other words, stress is still on horizontal policy measures but some vertical policy measures are adopted to meet the specific needs of the various sectors of the economy. The approach is pragmatic in that it focuses on the results rather than on ideology.