Industrial policy for growth

This study distinguishes between industrial policy that stimulates incumbent industry development, `pro-business policy', and industrial policy that promotes the development of free markets, `pro-market policy'. We find that there is a positive relation between the level of countries' implementation of these policies. However, we find opposite effects of pro-business and pro-market policies when estimating the policy effect on growth and income level. Pro-business policy has a positive effect on economic development, and pro-market policy has a negative effect on economic development.