MEXICO CITY, Sept. 18, 2014, CNS – A new study by the Inter-American Development Bank (IDB) has outlined when and how governments can intervene in an economy to boost productivity.
In the IDB’s flagship research publication Development in the Americas, researchers examined successful as well as failed industrial policies worldwide to come up with a pragmatic and forward-looking framework aimed at helping decision-makers find the right mix of productive development policies, taking into account the realities of each country.
“Industrial policies have fallen into disrepute because they often involved political favoritism, wasted resources, rent-seeking and corruption,” said Santiago Levy, the Vice President of Knowledge and Sectors at the IDB.
“However, we believe that provided appropriate institutions are in place, under certain circumstances well-crafted government interventions can help boost productivity, and we are providing a new conceptual framework for that purpose.”
While Latin America and the Caribbean region has made considerable economic and social progress over the past decade, the region still lags wealthier nations in productivity growth, which explains lower levels of income and well-being.
Creating the conditions to foster productivity growth is one of the main development challenges facing policymakers in the region today.
There is wide acceptance to the view that governments have an important role in helping the private sector become more competitive in a global economy. But with the region´s history of costly failures – from the informatics industry in Brazil to the rice producers in Costa Rica – industrial policy came to be viewed as a public sector overreach.
The groundbreaking study helps policymakers determine under what conditions it is useful to intervene and, if so, what would be the best tools to do it.
The book looks at the best available data and lays out a methodology to address how Latin America and the Caribbean government leaders can rethink policies of productive development to emphasise integration with global value chains, generate innovation, improve human capital, foster entrepreneurship and promote internationalisation, with the public and private sectors working together.
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