Industrial policy refers to a government's strategic effort to encourage the development and growth of specific sectors of the economy, often manufacturing. This is typically achieved through tools like subsidies, trade protection, and state-directed credit, with the goal of accelerating structural transformation and increasing national competitiveness.

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Developmental states employ a range of specific policies to guide economic growth. Key tools include: 1) Industrial Policy: Targeting and supporting specific industries deemed critical for future growth, often through subsidies, preferential loans, and trade protection. 2) Export Promotion: Actively encouraging and coordinating firms to compete in and capture international markets. 3) State-Directed Finance: Using public or state-influenced banks to channel capital towards strategic sectors. 4) Investment in Human Capital: Significant public spending on high-quality education and technical training to create a skilled workforce.

Core Policies of a Developmental State

A government that simply nationalizes all major industries is often described as operating a 'command economy'. In contrast, a 'developmental state' uses a more nuanced approach to guide economic growth. Describe two distinct policy tools, other than direct nationalization, that a developmental state would typically employ to foster the growth of a specific, targeted industry.

Policy Tools of a Developmental State

Industrial Policy

A national government institutes a series of economic policies aimed at rapidly growing its technology sector. These policies include providing direct subsidies to domestic electronics manufacturers, funding specialized university programs in computer science, and coordinating with private firms to establish export goals. Which economic model do these actions most closely represent?

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