Motivated by the renewed use of industrial policy, this article examines the conditions under which sector-specific interventions can support productivity, competitiveness, and economic resilience. While industrial policy may be justified where market failures or dependencies are well-identified, selective intervention entails risks of distortion through rent-seeking and resource misallocation. These risks are particularly relevant in the EU, where uncoordinated industrial policy is implemented in a multi-country Single Market with heterogeneous institutions and bank-based financial structures. In this setting, industrial policy can be effective only with credible governance and complementary structural reforms.
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