ABSTRACT
Industrialization has been used as a development ladder by most of present day's advanced economies. Regional convergence, besides being source of interpersonal inequality reduction, is a predictor of social cohesion, peace, and political stability. This chapter explores the interaction between these two pillars of development. It emphasizes that the successful implementation of a regionally inclusive industrial policy (RIIP) largely depends on the strength and weaknesses of the institutional environment of a country. Regional income growth and regional convergence form a resurgent topic in the literature of economic growth, largely due to the availability of new data sources and the development of new statistical models for spatial analysis. The successful implementation of a RIIP largely depends on the strength and weaknesses of the institutional environment of a country. Specifically, a country needs to build up enough state capacity to solve coordination failures, both across industries and regions.
