1.
Business Dynamism and Regional
Productivity
Spatial productivity for regional and local
development, OECD
14 September 2022
Arti Grover
Finance, Competitiveness and Innovation Global
Practice
The World Bank Group

2.
Are certain places more likely to generate dynamic
businesses (high-growth firms)?
 High-growth firms are young tech start-
ups that originate in clusters like Silicon
Valley; they start with a handful of
founders but once they take off, grow
rapidly and dominate the market on the
strength of their innovative products
and ideas
 HGFs operate in a wide range of
locations
High-Growth Firms: Facts, Fiction, and Policy Options for Emerging Economies
FACT
FICTION

3.
More entrepreneurship translates into business
dynamism (Brazil)
High-Growth Firms: Facts, Fiction, and Policy Options for Emerging Economies
Source: Grover, Medvedev and Olafsen (2019)

4.
Large urban agglomerations do not necessarily have
higher incidence of dynamic firms (Mexico)
High-Growth Firms: Facts, Fiction, and Policy Options for Emerging Economies
Source: Grover, Medvedev and Olafsen (2019)

5.
In fact, agglomerations in many developing
countries are sterile
Agglomeration elasticity estimates with
respect to wages, marginal cost and TFPQ
Source: Grover and Maloney (2021)
Urbanization without structural
transformation… as seen in Africa
Source: Report team elaborations based on World Development Indicators (accessed 2021)
Place, Productivity and Prosperity: Place, Productivity, and Prosperity : Revisiting Spatially Targeted
Policies for Regional Development

6.
Policy framework to support firm growth
High-Growth Firms: Facts, Fiction, and Policy Options for Emerging Economies
Firm dynamism and growth
Allocative Efficiency B2B Spillovers Firm Capabilities
Improving quality of firm-level data
Strengthening the rigor of policy evaluation
Building institutional capabilities to implement policy

7.
Place based Policies: Three Principles of Appraisal
 1: Narrative -- explain the economic rationale
 2: Estimate the Effects—Direct and Indirect
 3: Ensure That All Key Actors Will Coordinate to Deliver
the Package of Place-Based and Complementary Policies

8.
Main takeaways
1. Structural transformation is essential to spatial
transformation
− Population agglomeration often appears without development-driven ‘demand’ for spatial
reorganization.
− Migration is less effective as a lagging region policy without dynamic cities to move to.
− Urban policy and spatial inequality policies must be embedded in policies for economywide
structural transformation.
2. The success of spatial “hardware” solutions hinges on
complementary “software”
− Entrepreneurial and human capital.
− Government capabilities.
3. Place Based Policies need a structured accounting of likely
impacts and necessary complements
− Report framework stresses the need for ex ante appraisal of direct and indirect impacts.
− Given multidimensionality arising from complementarities, gov’t capabilities are binding on
project design.
− After appraisal, some regions will be less viable and policy makers need to frankly evaluate
PBPs vs. safety nets, fiscal transfers and migration.

9.
“Fortune favors
the prepared…”
Pasteur (1854)
The Productivity Project: www.worldbank.org/productivity
The World Bank Productivity Project