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www.growthuchicago.org
/growthuchicago
@growthuchicago
growth@uchicago.edu
2
Founding Fathers
3
What? Why? Who cares?
In GROWTH, we believe that private agents in
the market drive value creation and economic
growth. We...
We are not about:
Macroeconomics
…nor about the theories and models on
Economic Growth.
5
6
Student Speaker Series
7
9
Latin America and the Caribbean
10
8.5%
USD13,000
of global GDP
& of planet’s population
GDPPC
Productive Development Policies

(PDPs)
?
11
Methodology (1/2)
What is the market failure that has
been diagnosed to justify the policy?
12
1
Why does the market not a...
Methodology (1/2)
What instrument is a good match for
the diagnosis and could be used to
solve the market failure?
13
2
Po...
Methodology (1/2)
14
3
Ask first: What type of institutions
and with what characteristics are
needed to be able to develop ...
Methodology (2/2)
15
? ?
??
Main Lessons
16
1 Not having available a good,
service, or critical factor for
development, is not a necessary
condition t...
Main Lessons
17
2 Provided there is a market failure,
the solution to that failure should be
the best policy in terms of e...
Main Lessons
18
3 Given (1) and (2) –market failure
and best policy–, in absence of the
adequate institutions to carry out...
Main Lessons
19
4 Policies that directly intervene
markets are exposed to more risks
than those limited to the provision o...
Main Lessons
20
5 Given each economy’s specificities
and the proved absence of unique
recipes, it is better to choose the
p...
21
22
23
24
25
Import Substitution Industrialization
•  Market size
•  Political economy of protectionism
•  We give benefits. What do we ...
27
Debt crisis
The 80s
28
Liberal (“Neoliberal”) Paradigm &
The Washington Consensus
The 90s
29
International trade disciplines
economies
Let’s recap
•  Industrial Policy: failure in LATAM.
•  “The best industrial policy is to have no
industrial policy at all…...
31
Are PDPs relevant?
? Do policies that reduce the costs of
starting a business attract the right
kind of companies?
32
Are PDPs relevant?
? Should countries rely more on
grants or on tributary incentives to
stimulate business innovation?
33
Are PDPs relevant?
? How can you reward pioneers in an
industry in order to maximize
productivity increases?
34
Are PDPs relevant?
? Does it make sense to subsidize
investment in new technology?
35
Are PDPs relevant?
? How should the private sector
participate in human capital
policies?
36
Are PDPs relevant?
? Do immigration policies play a role in
a PDP?
37
Are PDPs relevant?
? How can countries encourage the
emergence of new exporting
activities?
38
Are PDPs relevant?
? What must be sought to attract
foreign direct investment and
connection to global value chains?
39
Are PDPs relevant?
? Is it worth to have special programs
for new or small businesses?
40
Are PDPs relevant?
? Should credit promotion policies be
based on credit guarantees, loans or
subsidies?
41
Are PDPs relevant?
? Should beneficiaries share the cost
of public goods for clusters?
42
Are PDPs relevant?
? How should you change a PDP as
countries develop?
43
Are PDPs relevant?
? What is the role of government
experimentation in a PDP?
44
Are PDPs relevant?
? Do program evaluation actually
measure the effectiveness of PDP?
45
Are PDPs relevant?
? How can we revitalize development
banks to be more effective and
safer?
46
Are PDPs relevant?
? How can you organize the public
sector in order to ensure the
necessary cooperation and
coordinati...
47
Are PDPs relevant?
? What kind of public-private
interaction is more effective to
design and implement PDPs?
48
Are PDPs relevant?
? What mechanisms can be
established to encourage greater
collaboration and less capture by the
priv...
49
Are PDPs relevant?
? How can countries establish a
process to identify sectors that are
worth supporting?
50
Features of 2nd generation PDPs
2.0 Comparative advantages (real and
potential) are in the center of the
discussion.
51
Features of 2nd generation PDPs
2.0 Export transformation strategies and
export promotion agencies play an
increasingly...
52
Features of 2nd generation PDPs
2.0 International competitiveness is the
best efficiency test (supporting
tradable goods...
53
Features of 2nd generation PDPs
2.0 Emphasis on manufactures has
vastly disappeared (e.g. services
and agriculture, now...
54
Features of 2nd generation PDPs
2.0 Policies oriented on market failures.
55
Features of 2nd generation PDPs
2.0 Increasing disposition on horizontal
interventions, but recognizing the
power of ve...
56
Features of 2nd generation PDPs
2.0 Cluster development as
predominant vertical approach.
57
Features of 2nd generation PDPs
2.0 Increasing emphasis on innovation.
More and more countries have
programs and instit...
58
Features of 2nd generation PDPs
2.0 Paradigm change: from
development policies managed and
implemented by the governmen...
59
Features of 2nd generation PDPs
2.0 The process of policy construction
tends to be bottom-up instead of
being up-down.
60
Features of 2nd generation PDPs
2.0 The government is considered a
facilitator of production decisions to
be executed b...
61
What the book is NOT about
•  Social policies.
•  Informal economy.
•  Macroeconomic policies (exchange rate).
•  Ideology...
63
PDPs conceptual framework
64
PDPs conceptual framework
65
PDPs conceptual framework
66
PDPs conceptual framework
67
PDPs conceptual framework
68
PDPs conceptual framework
Mariana Mazzucato
shows that some
crucial high-risk
investments are being
made by the state
before the private
sector gets...
70
Let’s recap, again
What is the market failure that has been
diagnosed to justify the policy?1
2
3
What instrument is a ...
“A Tale of Two Interventions”
Costa Rica
High import tariff
(35%), and high
price subsidy (45%).
71
Argentina
Tax on produ...
72
73
74
75
76
77
78
79
80
Picking
winners
?
81
Technical capabilities
Organizational
Political
82
Institutions for PDPs
83
Institutions for PDPs
Darker red, greater institutional capabilities required.
84
The book in one slide
What is the market failure that has been
diagnosed to justify the policy?1
2
3
What instrument is...
www.growthuchicago.org
/growthuchicago
@growthuchicago
growth@uchicago.edu
Student Speaker Series - IADB 2014 - Rethinking Productive Development
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Student Speaker Series - IADB 2014 - Rethinking Productive Development

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Presentation on the 2014 flagship publication of the Inter-American Development Bank: Rethinking Productive Development.

Published in: Economy & Finance
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Student Speaker Series - IADB 2014 - Rethinking Productive Development

  1. 1. www.growthuchicago.org /growthuchicago @growthuchicago growth@uchicago.edu
  2. 2. 2
  3. 3. Founding Fathers 3
  4. 4. What? Why? Who cares? In GROWTH, we believe that private agents in the market drive value creation and economic growth. We seek to raise awareness of the importance of public policies for wealth creation, private sector development, productivity and competitiveness. We also study ways to make public policy better support these outcomes. 4
  5. 5. We are not about: Macroeconomics …nor about the theories and models on Economic Growth. 5
  6. 6. 6
  7. 7. Student Speaker Series 7
  8. 8. 9
  9. 9. Latin America and the Caribbean 10 8.5% USD13,000 of global GDP & of planet’s population GDPPC
  10. 10. Productive Development Policies
 (PDPs) ? 11
  11. 11. Methodology (1/2) What is the market failure that has been diagnosed to justify the policy? 12 1 Why does the market not act upon presumably desirable opportunities?
  12. 12. Methodology (1/2) What instrument is a good match for the diagnosis and could be used to solve the market failure? 13 2 Policies need to be an effective solution to the problem.
  13. 13. Methodology (1/2) 14 3 Ask first: What type of institutions and with what characteristics are needed to be able to develop the policy successfully? Are institutional capabilities sufficiently strong to design and carry out policy as intended?
  14. 14. Methodology (2/2) 15 ? ? ??
  15. 15. Main Lessons 16 1 Not having available a good, service, or critical factor for development, is not a necessary condition to intervene. What makes PDPs necessary is the existence of a market failure.
  16. 16. Main Lessons 17 2 Provided there is a market failure, the solution to that failure should be the best policy in terms of efficiency, cost, risk and simplicity.
  17. 17. Main Lessons 18 3 Given (1) and (2) –market failure and best policy–, in absence of the adequate institutions to carry out the policy, it is best to first invest in the creation of that institutions rather than strive to apply the correct policy with inadequate institutions.
  18. 18. Main Lessons 19 4 Policies that directly intervene markets are exposed to more risks than those limited to the provision of public goods. Vertical policies also pose more complex scenarios than horizontal policies that do not exclude any sector or agent.
  19. 19. Main Lessons 20 5 Given each economy’s specificities and the proved absence of unique recipes, it is better to choose the policies that effectively fit with the institutional capacities of each economy, rather than look for best practices.
  20. 20. 21
  21. 21. 22
  22. 22. 23
  23. 23. 24
  24. 24. 25
  25. 25. Import Substitution Industrialization •  Market size •  Political economy of protectionism •  We give benefits. What do we get in return? •  Appreciation of the exchange rate 26 The 70s
  26. 26. 27 Debt crisis The 80s
  27. 27. 28 Liberal (“Neoliberal”) Paradigm & The Washington Consensus The 90s
  28. 28. 29 International trade disciplines economies
  29. 29. Let’s recap •  Industrial Policy: failure in LATAM. •  “The best industrial policy is to have no industrial policy at all…” •  Not really; macroeconomic stabilization and market-friendly structural reforms are not enough. •  New PDPs are needed. 30
  30. 30. 31 Are PDPs relevant? ? Do policies that reduce the costs of starting a business attract the right kind of companies?
  31. 31. 32 Are PDPs relevant? ? Should countries rely more on grants or on tributary incentives to stimulate business innovation?
  32. 32. 33 Are PDPs relevant? ? How can you reward pioneers in an industry in order to maximize productivity increases?
  33. 33. 34 Are PDPs relevant? ? Does it make sense to subsidize investment in new technology?
  34. 34. 35 Are PDPs relevant? ? How should the private sector participate in human capital policies?
  35. 35. 36 Are PDPs relevant? ? Do immigration policies play a role in a PDP?
  36. 36. 37 Are PDPs relevant? ? How can countries encourage the emergence of new exporting activities?
  37. 37. 38 Are PDPs relevant? ? What must be sought to attract foreign direct investment and connection to global value chains?
  38. 38. 39 Are PDPs relevant? ? Is it worth to have special programs for new or small businesses?
  39. 39. 40 Are PDPs relevant? ? Should credit promotion policies be based on credit guarantees, loans or subsidies?
  40. 40. 41 Are PDPs relevant? ? Should beneficiaries share the cost of public goods for clusters?
  41. 41. 42 Are PDPs relevant? ? How should you change a PDP as countries develop?
  42. 42. 43 Are PDPs relevant? ? What is the role of government experimentation in a PDP?
  43. 43. 44 Are PDPs relevant? ? Do program evaluation actually measure the effectiveness of PDP?
  44. 44. 45 Are PDPs relevant? ? How can we revitalize development banks to be more effective and safer?
  45. 45. 46 Are PDPs relevant? ? How can you organize the public sector in order to ensure the necessary cooperation and coordination between agencies for PDP?
  46. 46. 47 Are PDPs relevant? ? What kind of public-private interaction is more effective to design and implement PDPs?
  47. 47. 48 Are PDPs relevant? ? What mechanisms can be established to encourage greater collaboration and less capture by the private sector?
  48. 48. 49 Are PDPs relevant? ? How can countries establish a process to identify sectors that are worth supporting?
  49. 49. 50 Features of 2nd generation PDPs 2.0 Comparative advantages (real and potential) are in the center of the discussion.
  50. 50. 51 Features of 2nd generation PDPs 2.0 Export transformation strategies and export promotion agencies play an increasingly important role.
  51. 51. 52 Features of 2nd generation PDPs 2.0 International competitiveness is the best efficiency test (supporting tradable goods that fail to be competitive, reduces welfare).
  52. 52. 53 Features of 2nd generation PDPs 2.0 Emphasis on manufactures has vastly disappeared (e.g. services and agriculture, now included).
  53. 53. 54 Features of 2nd generation PDPs 2.0 Policies oriented on market failures.
  54. 54. 55 Features of 2nd generation PDPs 2.0 Increasing disposition on horizontal interventions, but recognizing the power of vertical interventions to solve bottlenecks of specific sectors.
  55. 55. 56 Features of 2nd generation PDPs 2.0 Cluster development as predominant vertical approach.
  56. 56. 57 Features of 2nd generation PDPs 2.0 Increasing emphasis on innovation. More and more countries have programs and institutions dedicated exclusively for innovation and technology diffusion.
  57. 57. 58 Features of 2nd generation PDPs 2.0 Paradigm change: from development policies managed and implemented by the government in isolation, to the recognition of the private sector’s central role in value creation.
  58. 58. 59 Features of 2nd generation PDPs 2.0 The process of policy construction tends to be bottom-up instead of being up-down.
  59. 59. 60 Features of 2nd generation PDPs 2.0 The government is considered a facilitator of production decisions to be executed by private agents, which gives priority to public-private partnerships.
  60. 60. 61
  61. 61. What the book is NOT about •  Social policies. •  Informal economy. •  Macroeconomic policies (exchange rate). •  Ideology. •  Recommendations. •  Recipes. 62
  62. 62. 63 PDPs conceptual framework
  63. 63. 64 PDPs conceptual framework
  64. 64. 65 PDPs conceptual framework
  65. 65. 66 PDPs conceptual framework
  66. 66. 67 PDPs conceptual framework
  67. 67. 68 PDPs conceptual framework
  68. 68. Mariana Mazzucato shows that some crucial high-risk investments are being made by the state before the private sector gets involved. 69
  69. 69. 70 Let’s recap, again What is the market failure that has been diagnosed to justify the policy?1 2 3 What instrument is a good match for the diagnosis and could be used to solve the market failure? Are institutional capabilities sufficiently strong to design and carry out policy as intended?
  70. 70. “A Tale of Two Interventions” Costa Rica High import tariff (35%), and high price subsidy (45%). 71 Argentina Tax on producers and use of resources for R&D.
  71. 71. 72
  72. 72. 73
  73. 73. 74
  74. 74. 75
  75. 75. 76
  76. 76. 77
  77. 77. 78
  78. 78. 79
  79. 79. 80 Picking winners ?
  80. 80. 81
  81. 81. Technical capabilities Organizational Political 82 Institutions for PDPs
  82. 82. 83 Institutions for PDPs Darker red, greater institutional capabilities required.
  83. 83. 84 The book in one slide What is the market failure that has been diagnosed to justify the policy?1 2 3 What instrument is a good match for the diagnosis and could be used to solve the market failure? Are institutional capabilities sufficiently strong to design and carry out policy as intended? Darker red, greater institutional capabilities required.
  84. 84. www.growthuchicago.org /growthuchicago @growthuchicago growth@uchicago.edu

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