Thiago Sevilhano MartinezOrrillo, Miguel2025-08-282025-08-282024-12MARTINEZ, Thiago Sevilhano; ORRILLO, Miguel. Industrial policy in production networks: which sectors to promote in Brazil? Revista Tempo do Mundo, Brasília, n. 36, p. 143–181, dez. 2024. Disponível em: http://dx.doi.org/10.38116/rtm36art5.https://repositorio.ipea.gov.br/handle/11058/18618This paper presents the theoretical framework developed by Liu (2019) for analyzing the impacts of industrial policy, with applications to South Korea, China, and Brazil. Using a general equilibrium model that incorporates market imperfections and input-output linkages, Liu (2019) demonstrates the existence of a synthetic measure – distortion centrality – related to a sector’s position within the production network. This measure indicates: a) which sectors should receive targeted subsidies; and b) the optimal priority ranking among them. We discuss Liu’s (2019) main findings when applying this framework to assess industrial policies in South Korea during the 1970s and in modern-day China. The results show a strong correlation between the sectors prioritized in these historical experiences and the ranking recommended by the theory. As an original empirical application, we compute the sectoral ranking for Brazil in 2019, identifying the industries that, according to this framework, should be prioritized for government support. The key findings are: i) industrial sectors dominate among those classified as high-priority, but some industries fall outside the group recommended for subsidies; ii) in the service sectors, there are both intermediate-priority sectors and those for which government support is not advised; and iii) agricultural sectors are within the eligible range for support but rank at the lower end of the priority scale.143-181engAcesso AbertoJournal ArticleInstituto de Pesquisa Econômica Aplicada (Ipea)IndústriaLicença ComumÉ permitida a reprodução deste texto e dos dados nele contidos, desde que citada a fonte. Reproduções para fins comerciais são proibidasIndustrial policySubsidiesInput-outputProduction networksGeneral equilibriumEconomic Development, Innovation, Technological Change, and Growth::Development Planning and Policy::Industrial PolicyPublic Economics::Taxation, Subsidies, and Revenue::Business Taxes and SubsidiesMathematical and Quantitative Methods::Mathematical Methods - Programming Models - Mathematical and Simulation Modeling::Input-Output ModelsMicroeconomics::General Equilibrium and DisequilibriumMicroeconomics::General Equilibrium and Disequilibrium::GeneralPolítica industrialSubsídiosInsumo-produtoRedes de produçãoEquilíbrio geral10.38116/rtm36art5