Industrial Policy Module

This is a course webpage for Dr. Zhou Chen’s Industrial Policy module.

Lecture Topics

The main lecture each week will consist of a one-and-a-half-hour session. These lectures will usually cover four topics as follows:

  1. Concepts and Practices: slides
  2. Theoretical Justification: slides
  3. Infant-Industry Protection and Trade: slides
  4. Foreign Direct Investment: slides

Reading List

  1. Acemoglu, D., Akcigit, U., Alp, H., Bloom, N., & Kerr, W. (2018). Innovation, Reallocation, and Growth. American Economic Review, 108(11), 3450–3491. https://doi.org/10.1257/aer.20130470
  2. Adda, J., & Cooper, R. (2000). Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies. Journal of Political Economy, 108(4), 778–806. https://doi.org/10.1086/316096
  3. Aghion, P., Cai, J., Dewatripont, M., Du, L., Harrison, A., & Legros, P. (2015). Industrial Policy and Competition. American Economic Journal: Macroeconomics, 7(4), 1–32. JSTOR.
  4. Allcott, H., Knittel, C., & Taubinsky, D. (2015). Tagging and Targeting of Energy Efficiency Subsidies. American Economic Review, 105(5), 187–191. https://doi.org/10.1257/aer.p20151008
  5. Bajgar, M., & Srholec, M. (2025). Crowding in or crowding out? Evidence from discontinuity in the assignment of business R&D subsidies. Journal of Public Economics, 245, 105357. https://doi.org/10.1016/j.jpubeco.2025.105357
  6. Bartelme, D., Costinot, A., Donaldson, D., & Rodríguez-Clare, A. (2024). The Textbook Case for Industrial Policy: Theory Meets Data. Journal of Political Economy, 0–0. https://doi.org/10.1086/734129
  7. Barwick, P. J., Kalouptsidi, M., & Zahur, N. B. (2025). Industrial Policy Implementation: Empirical Evidence from China’s Shipbuilding Industry. Review of Economic Studies, rdaf011. https://doi.org/10.1093/restud/rdaf011
  8. Beraja, M., Peng, W., Yang, D. Y., & Yuchtman, N. (2024). Government as Venture Capitalists in AI (Working Paper No. 32701). National Bureau of Economic Research. https://doi.org/10.3386/w32701
  9. Bhagwati, J., & Ramaswami, V. K. (1963). Domestic Distortions, Tariffs and the Theory of Optimum Subsidy. Journal of Political Economy, 71(1), 44–50. Q1.
  10. Cao, L., Jiang, H., Li, G., & Zhu, L. (2024). Haste makes waste? Quantity-based subsidies under heterogeneous innovations. Journal of Monetary Economics, 142, 103517. https://doi.org/10.1016/j.jmoneco.2023.09.004
  11. Chen, Z., Liu, Z., Suárez Serrato, J. C., & Xu, D. Y. (2021). Notching R&D Investment with Corporate Income Tax Cuts in China. American Economic Review, 111(7), 2065–2100. https://doi.org/10.1257/aer.20191758
  12. Choi, J., & Levchenko, A. A. (2025). The long-term effects of industrial policy. Journal of Monetary Economics, 103779. https://doi.org/10.1016/j.jmoneco.2025.103779
  13. Criscuolo, C., Martin, R., Overman, H. G., & Van Reenen, J. (2019). Some Causal Effects of an Industrial Policy. American Economic Review, 109(1), 48–85. https://doi.org/10.1257/aer.20160034
  14. De Groote, O., & Verboven, F. (2019). Subsidies and Time Discounting in New Technology Adoption: Evidence from Solar Photovoltaic Systems. American Economic Review, 109(6), 2137–2172. https://doi.org/10.1257/aer.20161343
  15. Dupas, P. (2014). Short-Run Subsidies and Long-Run Adoption of New Health Products: Evidence From a Field Experiment. Econometrica, 82(1), 197–228. https://doi.org/10.3982/ECTA9508
  16. Fajgelbaum, P. D., & Gaubert, C. (2025). Place-Based Policies: Lessons from Theory (Working Paper No. 33517). National Bureau of Economic Research. https://doi.org/10.3386/w33517
  17. Fan, Y., & Xiao, M. (2015). Competition and subsidies in the deregulated US local telephone industry. The RAND Journal of Economics, 46(4), 751–776. https://doi.org/10.1111/1756-2171.12109
  18. Ferrari, A., & Ossa, R. (2023). A quantitative analysis of subsidy competition in the U.S. Journal of Public Economics, 224, 104919. https://doi.org/10.1016/j.jpubeco.2023.104919
  19. Garin, A., & Rothbaum, J. (2025). The Long-Run Impacts of Public Industrial Investment on Local Development and Economic Mobility: Evidence from World War II*. The Quarterly Journal of Economics, 140(1), 459–520. https://doi.org/10.1093/qje/qjae031
  20. Goldberg, P. K., Juhász, R., Lane, N. J., Lo Forte, G., & Thurk, J. (2024). Industrial Policy in the Global Semiconductor Sector (Working Paper No. 32651). National Bureau of Economic Research. https://doi.org/10.3386/w32651
  21. Gross, D. P., & Sampat, B. N. (2023). America, Jump-Started: World War II R&D and the Takeoff of the US Innovation System. American Economic Review, 113(12), 3323–3356. https://doi.org/10.1257/aer.20221365
  22. Howell, S. T. (2018). Joint ventures and technology adoption: A Chinese industrial policy that backfired. Research Policy, 47(8), 1448–1462. https://doi.org/10.1016/j.respol.2018.04.021
  23. Ito, K. (2015). Asymmetric Incentives in Subsidies: Evidence from a Large-Scale Electricity Rebate Program. American Economic Journal: Economic Policy, 7(3), 209–237. https://doi.org/10.1257/pol.20130397
  24. Jiang, Z., & Xu, C. (2023). Policy incentives, government subsidies, and technological innovation in new energy vehicle enterprises: Evidence from China. Energy Policy, 177, 113527. Q1/Q2. https://doi.org/10.1016/j.enpol.2023.113527
  25. Juhász, R., & Lane, N. J. (2024). The Political Economy of Industrial Policy (Working Paper No. 32507). National Bureau of Economic Research. https://doi.org/10.3386/w32507
  26. Juhasz, R., Lane, N., Oehlsen, E., & Pérez, V. C. (2022). The Who, What, When, and How of Industrial Policy: A Text-Based Approach. OSF. https://doi.org/10.31235/osf.io/uyxh9
  27. Kalouptsidi, M. (2018). Detection and Impact of Industrial Subsidies: The Case of Chinese Shipbuilding. The Review of Economic Studies, 85(2), 1111–1158. https://doi.org/10.1093/restud/rdx050
  28. Kleer, R. (2010). Government R&D subsidies as a signal for private investors. Research Policy, 39(10), 1361–1374. https://doi.org/10.1016/j.respol.2010.08.001
  29. Kong, D., Liu, C., & Ye, W. (2023). Randomized inspection and firm’s government subsidies: A natural experiment in China. China Economic Review, 82, 102064. https://doi.org/10.1016/j.chieco.2023.102064
  30. Lashkaripour, A., & Lugovskyy, V. (2023). Profits, Scale Economies, and the Gains from Trade and Industrial Policy. American Economic Review, 113(10), 2759–2808. https://doi.org/10.1257/aer.20210419
  31. Lin, J., Wu, H.-M., & Wu, H. (2021). Could government lead the way? Evaluation of China’s patent subsidy policy on patent quality. China Economic Review, 69, 101663. https://doi.org/10.1016/j.chieco.2021.101663
  32. Liu, Y., & Mao, J. (2019). How Do Tax Incentives Affect Investment and Productivity? Firm-Level Evidence from China. American Economic Journal: Economic Policy, 11(3), 261–291. https://doi.org/10.1257/pol.20170478
  33. Lu, F., Sun, W., & Wu, J. (2023). Special Economic Zones and Human Capital Investment: 30 Years of Evidence from China. American Economic Journal: Economic Policy, 15(3), 35–64. https://doi.org/10.1257/pol.20200492
  34. Lu, Y., Wang, J., & Zhu, L. (2019). Place-Based Policies, Creation, and Agglomeration Economies: Evidence from China’s Economic Zone Program. American Economic Journal: Economic Policy, 11(3), 325–360. https://doi.org/10.1257/pol.20160272
  35. Mitrunen, M. (2025). War Reparations, Structural Change, and Intergenerational Mobility*. The Quarterly Journal of Economics, 140(1), 521–584. https://doi.org/10.1093/qje/qjae036
  36. Raghunandan, A. (n.d.). Government Subsidies and Corporate Misconduct. Journal of Accounting Research, n/a(n/a). https://doi.org/10.1111/1475-679X.12553
  37. Shin, I., & Kim, H. (2010). The effect of subsidy policies on the product quality improvement. Economic Modelling, 27(3), 687–696. https://doi.org/10.1016/j.econmod.2010.01.008
  38. Tao, P., Gong, F., & Zhu, K. (2023). Tax competition among local governments: Evidence from the spillovers of location-based tax incentives in China. China Economic Review, 82, 102077. https://doi.org/10.1016/j.chieco.2023.102077
  39. Thomas, J. P., & Wang, Z. (2017). Marginal Subsidies in Tullock Contests. Journal of Public Economic Theory, 19(2), 511–526. https://doi.org/10.1111/jpet.12203
  40. Zheng, S., Sun, W., Wu, J., & Kahn, M. E. (2017). The birth of edge cities in China: Measuring the effects of industrial parks policy. Journal of Urban Economics, 100(C), 80–103.
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