Paper short abstract:

This paper concerns the political economy of industrial policy formulation and implementation. It compares subnational cases from Mexico (Jalisco and Querétaro) via process-tracing to better understand how shifting coalitions assemble resources and support for successful industrial policy.

Paper long abstract:

The global pandemic, climate crisis, and intensified geopolitical tension are all motivating a new common wisdom that states must intervene more actively in the economy to solve problems otherwise intractable to the market. Despite a strong consensus among scholars and policymakers on this need, important questions remain as to how states become able to intervene effectively in such complex and uncertain arenas. We take up this question by leveraging sub-national variation in industry trajectories in Mexico. Focusing on the regionally proximal states of Querétaro and Jalisco, we consider a "reversal of fortune" since the 1980s. Jalisco, much larger and initially wealthier than Querétaro, was poised to become "Mexico's Silicon Valley"; however, these aspirations fizzled and the state experienced an extended period of economic stagnation. Meanwhile, Querétaro, much smaller and poorer than Jalisco, grew quickly to Mexico's forefront in advanced manufacturing and skilled labor (e.g. engineering, R&D), all while quickly rising in the national ranks of GDP per capita. We investigate this surprising reversal by tracing changes in each state's ruling regimes over time - their coalitions, resources, policies, and implementation processes. We use this process-tracing approach to better isolate how changes in coalitional composition enable and constrain state capacity to resolve coordination challenges and enact the kinds of industrial transformation that are the goals of today's industrial policies.