For decades the service sector has driven the economy in the United States. Is there a role for industrial policy in sustaining this growth? Dani Rodrik (Harvard University) has written a policy proposal that explains how a modern industrial policy framework would create more “good jobs” by improving productivity and labor income growth for service-sector workers. Rodrik defines a good job as one that invests in worker skills, provides workers with a voice, discretion, and autonomy, and gives them responsibility for the quality of service.
A modern industrial policy would need to move beyond the traditional focus on manufacturing and globally competitive industries to the service sector and smaller and medium-sized firms. And the practice of industrial policy will need to rely less on traditional top-down policy instruments—such as subsidies and tax incentives for firms—and more on collaborative, iterative interaction whereby public agencies supply a portfolio of customized public services in exchange for firms undertaking soft commitments on the quantity and quality of employment.
The practice of industrial policy will need to rely less on traditional top-down policy instruments.
Rodrik proposes both federal and local initiatives as the components of “An Industrial Policy for Good Jobs.” The local approach builds on the existing framework of development and business assistance programs: …