The focus of this paper is on policiesthat ought to support productivity, output and employmentgrowth. This support can be direct and indirect, targeted tospecific sectors or types of firms or wide ranging. Thepresence of externalities is the main theoreticaljustification for deviating from policy neutrality ifenhancing economic efficiency is the policy objective.Policies seeking to correct efficiency-related marketfailures could, for instance, support local within-sectorMarshallian externalities or intra-sector spillovers,collective action to overcome sector-specific coordinationfailures, and the promotion of information spilloversassociated with self-discovery and product diversification,based on static or dynamic knowledge, learning or otherpositive externalities (Harrison and Rodriguez-Clare, 2010).The presence of market failures is only a necessary and notsufficient rationale for government intervention. It is alsoimportant to ensure that the benefits to the economy fromany intervention outweigh the associated costs including thecosts of any government failures in the design andimplementation of the intervention - linked among others toimperfect information by government of productivity-relatedfirm needs, government capture and the creation of rents aswell as outright corruption (Hevia et al., 2017).
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