How to rethink productive development?
Strong policies and institutions for economic transformation
Summary
One of the main causes of the relative lag of Latin American and Caribbean countries is insufficient productivity growth. For this reason, productive development strategies must focus on creating conditions for improving productivity growth rates.
This book aims to reorient the approach to productive development policies in these countries, not only in terms of design but also in terms of improving institutional capacities. From this perspective, the authors reach five main conclusions:
- The need to implement productive development policies arises from the existence of a market failure, whether static or dynamic.
- To effectively address this issue, policies must be chosen based on parameters of efficiency, cost, risk, and simplicity.
- Even if there is a market failure and an efficient productive development policy, the latter cannot be implemented correctly if the corresponding institutions are not trained. Therefore, it is of utmost importance to invest in institutional training prior to implementing any policy.
- Policies that involve market interventions (such as subsidies and exemptions) are riskier than those that limit themselves to producing public inputs (such as infrastructure), since the former affect the incentives received by the private sector, while the latter improve the sector's competitiveness.
- It's not about seeking best practices, but rather choosing policies that effectively fit the institutional capacities of each economy.
Thus, the authors emphasize productive development policies oriented towards competitiveness and integration into global value chains, as well as innovation, improvement of human capital, facilitation of entrepreneurship and cluster, internationalization and cooperation between the public and private sectors.
Reference
Crespi, G., Fernández-Arias, E. and Stein, E. (2014). How to rethink productive development? Strong policies and institutions for economic transformation. Recovered from http://www.iadb.org/es/investigacion-y-datos/detalles-de-publicacion,3169.html?pub_id=IDB-BK-130
Note: summary made by CATRADE Grupo Consultor en Comercio Exterior.