How do institutions matter for “pockets of growth”? Commodities Price-Sensitive Quality Sensitive Public goods (low) Public goods (low) Public goods (low) Legal security (low) Legal security (low) Legal security (low) Illegal contraband Illegal contraband Supply chain coord. Supply chain coord. High cost finance High cost finance Managerial expertise Human resources All: comparative advantage is frequently based on cheap labour and cheap natural resources
Growth strategies for “pockets of growth” Commodities P-Sensitive Q-Sensitive Markets Bilateral trade Multilateral Multilateral Compete price Comp. price Comp. Quality Scale Large Large/medium Medium/small Formal Formal/informal Formal/Informal Managerial Backward integ. Backward coord. Low linkages High linkages All: Use institutional/managerial strategeis to get around binding contraints
Conclusions Analytical: The pockets of growth approach allows us to control for structural constraints common to all export products. While “everything matters” at the aggregate level, specific institutional binding constraints matter the most for price-specific and quality specific industries. This allows us to “unpack” the weight of specific institutional determinants of growth and poverty reduction (pending).
Conclusions Policy: If “pockets of growth” emerge in low growth, low-investment and low-productivity economies, than policies that attack specific binding constraints allow a certain degree of “leap-frogging” convergence constraints. Bolivia should pursue a “three-gear” policy strategy for commodities, price-sensitive industry and quality sensitive industry that discriminates between “basics” and “tailored” policy impact (pending).