Industrial Policy - How to Choose Industries that Should Be Supported

Sometimes industrial police is a success story, but sometimes it is a total failure. It seems like the best results are achieved in countries that (1) support industries oriented not only towards import substitution, but also towards export, at least in the longer run, and (2) support not all exports, but only exports of products that are associated with greatest externalities, emerging when returns for the whole society are larger than returns for particular exporting companies. As a rule, these are secondary manufacturing and high-tech industries. The ways to select industries that should be supported are discussed in the paper.