Industrial Policy and Participation in Global Value Chains: The Role of State-Society Relations in Shaping Policies and Outcomes

This paper uses a novel theoretical framework explaining how state-society relations shape the way industrial policies lead to varying benefits from participation in Global Value Chains (GVCs). The framework focuses on state-business-labor relations (SBLR) as an institutional environment that is shaped by power relations among contending actors as reflected in non-state-actors’ ability to organize and push their interests. Several GVC participation benefits indicators are developed. Then, these indicators and others are used in conducting statistical and regression analysis using mainly the TSLS model. The regressions test the effect of the interaction between horizontal industrial policies and SBLR modes on GVC participation benefits. The findings suggest that balanced-SBLR mode, featuring more balanced-power relations between state and non-state actors, offer the most conducive arrangement in realizing the benefits from recommended industrial policies. JEL Codes: O43, O25, O38, O57