TCI 2014 Rethinking Productive Development: Sound Policies and Institutions
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Transcript of TCI 2014 Rethinking Productive Development: Sound Policies and Institutions
Rethinking Productive Development:
Sound Policies and InstitutionsCarlo Pietrobelli
Mexico and Latin American Economies
11 November 2014
Rethinking Productive
Development: Sound
Policies and Institutions
Carlo Pietrobelli Lead Economist
Competitiveness and Innovation Division
Inter-American Development Bank
GDP per capita: Mexico slower than other
emerging countries. The gap with the US widens
-3-
0
5
10
15
20
25
30
35
40
45
0
5
10
15
20
25
30
19
60
19
62
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64
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00
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PIB
pe
r c
áp
ita
(m
ile
s d
e d
óla
res
de
20
05
)E
sc
ala
log
arí
tmic
a
Ingreso per Cápita(1960-2009)
Brasil China
India Corea
México Estados Unidos (eje derecho)
country
GDPpc annualgrowth
1960-2009
China 6.53
S.Korea 5.59
India 3.03
Brasil 2.44
USA 2.19
México 1.92
Problem in LAC: Low and falling productivity
73.4
52.0
49
54
59
64
69
74
79
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008
Po
rcen
taje
de
Pro
duct
ivid
ad T
ota
l d
e lo
s F
acto
res
de
Est
ado
sU
nid
os
País típico de América Latina
Source: Own calculations based on Fernández-Arias (2014).
11/20/2014 4
73.4
52.049.4
66.7
49
54
59
64
69
74
79
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008
Po
rcen
taje
de
Pro
duct
ivid
ad T
ota
l d
e lo
s F
acto
res
de
Est
ado
sU
nid
os
País típico de América Latina País típico tigres asíaticos
Source: Own calculations based on Fernández-Arias (2014).
Very different in East Asia
11/20/2014 5
Many other countries invested much more in
Research and Development
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5
ParaguayEl Salvador
PerúBolivia
ColombiaPanamáEcuador
América LatinaUruguay
ChileMéxico
Costa RicaArgentina
BrasilItalia
EspañaReino Unido
FranciaOCDE
AlemaniaEstados Unidos
DinamarcaSuecia
Corea del SurFinlandia
Israel
Fuente: OCDE (2010) y RICYT (2013).
Source: Author’s calculations based on Hausmann et al (2011).
Countries like Korea used industrial policies
to produce deep economic transformation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1984 1988 1992 1996 2000 2004 2008
electronics
garments
machinery
2008
7
Source: Author’s calculations based on Hausmann et al (2011).
Latin America underwent little transformation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1984 1988 1992 1996 2000 2004 20082008
8
electronics
garments
Edited by
DEVELOPMENT IN THE AMERICASIDB
RethinkingProductive DevelopmentSound Policies and Institutions for Economic Transformation
10
Innovation and New Dynamic Firms Clusters’ synergies
Take full advantage of Globalization
11
Schools and SkillsProtect the policy process from
capture and rent-seeking
Development Banks? Picking winners?
IM
Policies of the past…IM
H V
12
IM
Rice Protection in Costa Rica
IM
H V
Public policies captured by CONARROZ, dominated
by larger producers and rice processors
As local demand exceeds local production, import
tariffs at 35% protect non-competitive (local)
production; tariff-free import licenses are then granted
to local rice producers to process it. They import rice
at low international prices and sell it domestically at
higher prices.
The poor suffer: consumers pay high prices and
processors gain subsidies.
…and policies of the future
14
Rice Development in Argentina
(new varieties from Entre Ríos)
Low productivity rice variety was being exported from Entre
Ríos; with Brazil depreciation in 1999, rice exports lose
competitiveness.
At the same time INTA (in Concepción) was developing a new
higher quality and higher productivity rice variety
Local producers (through Pro-Arroz, their local foundation) tax
themselves to support INTA’s activities.
The Local Government helps by limiting free-riding (all gain
from a new variety but nobody is ready to pay for it!!) and
fostering coordination by imposing a new levy to finance INTA.
Results: new rice variety, increase in competitiveness, INTA
becomes world leader in rice technology.
Rice Productivity
50
75
100
125
150
175
200
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Pro
duct
ion
Index
by
hec
tare
(1990=
100)
Sources: Own calculations based on FAO (2013).
Costa Rica
Argentina
Modern Industrial policies:
Can be done successfully…if done right
16
Need to rethink a modern approach to
industrial development and structural change
In LAC ambiguous approach to industrial policies: often
used in the 1970s and 1980s, then abandoned in favor of a
“Washington Consensus”.
Indiscriminate rejection of old policies was not a solution either:
the Washington Consensus was not enough for satisfactory
growth.
Yet other countries implemented industrial policies cleverly and
successfully.
How to tell apart the good policies from the bad ones.
A pragmatic approach to help promote economic transformation
and Competitiveness in a globalized world.
Three basic tests for policies
1. Market Failures: Why is it that the market
does not do by itself what appears desirable?
2. Policy Design: Is the policy intervention a
proper remedy for the market failure? “wrong”
interventions would not help.
3. Institutions: Does the country have the
required institutions to adopt the policy
effectively? (Government failure may be
worse)
What to do…
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…and not to do
Policy
Design:
Public
Inputs
Market
Interventions
Horizontal Vertical
A Typology of PDP Interventions
One-stop shop for
business
registration
R&D subsidies
Phytosanitary
controls
Tax exemptions
for tourismR&D subsidies
20
Industrial policies are complex and risky. They
require:
• Process of discovering right policies
• Collaboration with private sector
• Efforts to avoid capture and rent seeking
• Cooperation across government agencies
Institutions key for success, but vary greatly across
countries• Policies that work in one context do not necessarily work in
others
Rather than best practices, adopt policies that best
match capabilities and institutions
Not best practices but best matches
21
Local examples of clever and modern
industrial policies.
Mechanisms to:
“discover” what policies are needed
improve coordination (private-private,
private-public, public-public)
What do Cluster Development Policies
have to do with this?
In a cluster externalities and coordination
failures naturally emerge, but also opportunities
to remedy them.
The correction of information asymmetries, of
externalities, of coordination failures, are the
guiding principles for cluster development
policies.
Help to exploit the advantages of linkages.
Why Cluster Development Programs?
IDB Cluster Programs in LAC
Organization No. of clusters
US$ Characteristics
IDB 180 300 M. (180 M. from IDB)
18 Loans supporting competitiveness, to Governments (often at sub-national level). In each Investments in approx. 10 clusters
IDB 30 70 M. approx. Some cluster-specific loans (DR, Gua, Hon, Panama, Haiti, Ecua)
MIF 72+40 US$120 M. approx.
Since 2007, grants to the private sector. First clusters (72), then local economic development (LED) (40).
Total IDB Group 322 490 M. approx.
Since 2000, always with local co-financing
Lessons from Experience
In fact cluster development programs have represented tools to
coordinate microeconomic policies.
They have often been flexible enough to adapt to local
circumstances and needs.
Through their participatory approach they have often helped to
identify the missing public inputs, the public policies needed, to
prioritize policies, and create consensus. (“Discovery” of the
right policies).
Many programs created local conditions for a better coordination
and collaboration among firms and with public entities.
“Platforms” to facilitate coordination and joint actions.
“Capture” of subsidies and “rent-seeking” appear to have been
lower than one would fear. “Checks and balances” were built
thanks to multi-stakeholder participation.
26
Do they Work? IDB Ongoing Impact Evaluation Efforts
E.g. in Brazil: Positive direct and significant effects on:
o Employment: about 20% increase in 3-5 years;
o Probability to export: about +5% per year;
o Export levels: increase 50%-80% for each exporter, with
persisting and growing effects overtime.
Indirect effects on firms localized in the area of influence of
clusters, especially on the export probability and levels.
Analysis of linkages, networks, and their influence on firms and
clusters performance through Social Network Analysis
In Maffioli, Pietrobelli, Stucchi (Eds.), 2015, The Evaluation of Cluster Development Programs,
Washington DC: IDB, a summary in:
http://www.iadb.org/document.cfm?id=37925857&pubDetail=1&wt_docType=Technical
Notes&wt_docnum=37925857&wt_language=en&wt_department=IFD/CTI&lang=en
Check out our new App at the IDB!Updated data and main messages of 9 DIA editions
Or visit our website www.idb.org/DIAapp
and
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