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Copyright

Reda Cherif; Fuad Hasanov; Xun Li;

Published On

2024-12-11

Page Range

pp. 109–134

Language

  • English

Print Length

26 pages

7. A “True” Industrial Policy for Europe Is a Technology and Innovation Policy

Since the Global Financial Crisis of 2008, the “core” European countries have been losing their competitive edge in global markets for sophisticated products such as electronics and green transportation and power technologies, while also missing out on the earlier revolution in information and communication technology (ICT). Meanwhile, the “periphery” European countries have been slowing down and, in pre-crisis years, have mostly channelled their investment into non-tradable industries, concentrating their resources in relatively lower productivity and lower skill activities. The slowdown in growth and convergence highlights the need to reignite productivity and economic dynamism. Lessons from the Asian economic miracles and Europe’s own growth experience suggest the importance of developing sophisticated sectors. The development of these sectors is riddled with both government and market failures, requiring adequate policies to tackle them. We argue that a “true” industrial policy for Europe is a technology and innovation policy (TIP) that focuses on correcting market failures to spur innovation, scale up, and support production networks in sophisticated industries across Europe while reorienting the engines of growth of “periphery” economies toward sophisticated sectors and their complex value chains. TIP’s guiding principles are a focus on global markets, competition, and a strict accountability framework, where the “hard” tools such as tariffs and subsidies may not be necessary and may be potentially counterproductive.

Contributors

Reda Cherif

(author)
Senior Economist at International Monetary Fund
Affiliated Researcher at the Bennett Institute for Public Policy at University of Cambridge
Senior Research Advisor at the Center of Technology and Industrialization for Development (TIDE) at University of Oxford

Reda Cherif is a Senior Economist at the International Monetary Fund (IMF), an Affiliated Researcher at the Bennett Institute for Public Policy at the University of Cambridge, a Senior Research Advisor at the Center of Technology and Industrialization for Development (TIDE), University of Oxford, and a Fellow at the Royal Society for the Arts. He joined the IMF in 2008, as part of the Economist Program, and worked in several departments: in the Fiscal Affairs Department, where he was an economist on the Gabon program; in the Middle East and Central Asia Department, where he covered Saudi Arabia, Qatar and Bahrain; and in the African Department, where he worked in the Regional Studies Division, issuing analytical work on trade, competition and oil economies. He has published numerous articles on the energy transition, public debt dynamics, commodity exporters, development, industrial policy, growth, and innovation. His work was published in the Journal of Development Economics and World Development among others, and it was featured in the Economist, Financial Times and National Geographic. He is the co-editor, with Fuad Hasanov and Min Zhu, of Breaking the Oil Spell, a book studying economic diversification in oil exporters. Reda holds an MSc in Economics from the London School of Economics and a PhD in Economics from the University of Chicago.

Fuad Hasanov

(author)
Senior Economist at International Monetary Fund
Adjunct Professor of Economics at Georgetown University
Affiliated Researcher at the Bennett Institute for Public Policy at University of Cambridge

Fuad Hasanov is a Senior Economist at the International Monetary Fund (IMF), an Adjunct Professor of Economics at Georgetown University, an Affiliated Researcher at the Bennett Institute for Public Policy at the University of Cambridge, and a Senior Research Advisor at the Technology and Industrialization for Development (TIDE) Centre at the University of Oxford. Before joining the IMF in 2007, Fuad was an Assistant Professor of Economics at Oakland University in Rochester, Michigan. His recent research focuses on natural resources, growth and innovation, and industrial policy. He is the co-editor, with Reda Cherif and Min Zhu, of Breaking the Oil Spell that examines economic diversification in oil-exporting countries. Fuad received a PhD, MS, and BA in economics from the University of Texas at Austin.

Xun Li

(author)
Research Analyst at International Monetary Fund

Xun Li is a Research Analyst at the International Monetary Fund (IMF). At the IMF, Xun has contributed to surveillance and policy formulation to promote sustainable economic growth in Europe. Xun holds a Master in Public Administration from Columbia University School of International and Public Affairs, specializing in renewable energy financial modeling and energy and environmental economic analysis.