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Innovation and Growth in LAC: The Next Generation of Reforms

Innovation and Growth in LAC: The Next Generation of Reforms. William F. Maloney Office of the Chief Economist, LA, World Bank. Why Innovation Push Now?. Ongoing work WBI: knowledge economy studies HD: higher education projects FPSI: E-gov, E-Bus. Region- Preoccupation with slowed growth

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Innovation and Growth in LAC: The Next Generation of Reforms

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  1. Innovation and Growth in LAC:The Next Generation of Reforms William F. Maloney Office of the Chief Economist, LA, World Bank

  2. Why Innovation Push Now? • Ongoing work • WBI: knowledge economy studies • HD: higher education projects • FPSI: E-gov, E-Bus. • Region- Preoccupation with slowed growth • Regional Flagships: • From Natural Resources to the Knowledge Economy… Why did LAC’s natural resources sectors underperform Scandinavia, Australia- Lack of innovative capacity • Closing the Gaps in Education and Technology-takes a closer look

  3. TFP growth faster in agriculture than manufacturing. Half of Growth is Total Factor Productivity

  4. LAC- way below R&D Superstars

  5. LAC’s efficiency of converting R & D into patents,TFP is also low Patents = B1R&D + Bpcountry*R&D 20.00% 15.00% 10.00% 5.00% 0.00% ISR FIN CRI BRA ARG PER VEN CHL COL URY KOR NOR TWN MEX -5.00% -10.00%

  6. National Innovation System Global Knowledge Economy Human Capital Think Tanks/ Antenna University Innovation Clusters Firms Other Public Policies: Rules of the Game Infrastructure (ICT) Subsidies/Tax incentives Coordination Initiatives Innovation & TFP Growth Global Knowledge Economy

  7. Why is LAC not Finland? The challenge ahead • Weak human capital • Not addressing serious mkt failures in innovation • Few incentives to R & D - tax breaks, subsidies • Weak efforts to help firms learn • Incubators, research parks, consortia • Disfunctional NIS: • LAC’s NIS-closer to the Holy Roman Empire than Finland. • No mkt forces assure elements of NIS work together • Missing supporting markets-credit, labor

  8. The Bank’s Challenge • Hippocratic Oath- “First do no harm” • Mkt failures- last refuge of the interventionist scoundrel • Innovation: the Trojan horse of state discipline? • Bad incentives, institutions already implemented that will be hard to reform- U’s, public labs • Commit to a long dialogue • Know what we’re talking about! • Down to policy details • Do/sponsor the LDC research necessary and.. • Get our models right: • What’s a knowledge economy anyway? • What the heck is high tech?

  9. Who Should LAC follow? Deviations from expected level Finland Korea FDI R&D License Payments Fuente: Maloney (2004)

  10. But Spain, Italy and Portugal follow a different path. Chile Spain FDI R&D License Payments

  11. FIN

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