Economic Premise
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The Economic Premise series summarizes good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank.
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Publication
From Imitation to Innovation : Public Policy for Industrial Transformation
(World Bank, Washington, DC, 2013-05)What role does public policy play in helping countries accelerate the industrialization process? This note aims to answer this question by applying a framework to analyze the process of transitioning from imitation to innovation. Based on a dynamic model of growth, simulations suggest that learning through imitation may enable firms to improve productivity significantly in a first stage, and that this may eventually benefit innovation activity as well. The model also shows how failure to switch from imitation as the main source of productivity growth to broad-based, homegrown innovation could lead to the 'middle-income trap' that has befallen some countries. -
Publication
Gender Equality and Economic Growth in Brazil
(World Bank, Washington, DC, 2013-03)This note studies the long-run impacts of policies aimed at fostering gender equality on economic growth in Brazil. After a brief review of gender issues in Brazil, this note describes a framework for quantifying the growth effects of gender-based policies in developing economies. The analysis is based on a computable overlapping generations (OLG) model that accounts for the impact of access to infrastructure on women's time allocation, as well as human capital accumulation, inter- and intra-generational health externalities, and bargaining between spouses. The model is calibrated for Brazil and is used to conduct two experiments, the first involving improved access to infrastructure, and the second a reduction in gender bias in the marketplace. The key lesson of these experiments, is that fostering gender equality, which may depend significantly on the externalities that infrastructure creates in terms of women's time allocation and bargaining power, can have a substantial impact on long-run growth in Brazil. -
Publication
Avoiding Middle-Income Growth Traps
( 2012-11)Since the 1950s, rapid growth has allowed a significant number of countries to reach middle-income status; yet, very few have made the additional leap needed to become high-income economies. Rather, many developing countries have become caught in what has been called a middle-income trap, characterized by a sharp deceleration in growth and in the pace of productivity increases. Drawing on the findings of a recently released working paper (Agenor and Canuto 2012), as well as a growing body of research on growth slowdowns, this note provides an analytical characterization of 'middle-income traps' as stable, low-growth economic equilibrium where talent is misallocated and innovation stagnates. To counteract middle-income traps, there are a number of public policies that governments can pursue, such as improving access to advanced infrastructure, enhancing the protection of property rights, and reforming labor markets to reduce rigidities all implemented within a context where technological learning and research and development (R&D) are central to enhancing innovation. Such policies not only explain why some economies particularly in East Asia were able to avoid the middle-income trap, but are also instructive for other developing countries seeking to move up the income ladder and reach high-income status. -
Publication
Measuring the Effect of Gender-Based Policies on Economic Growth
(World Bank, Washington, DC, 2012-06)To this day, policy makers, policy advisers, and economists in development institutions do not have any practical tools to help them to assess the impacts of policies aimed at promoting gender equality and quantify the effect of these policies on growth. Yet, there has been limited effort in that direction. This note lays out such a tool, a framework for quantifying the growth effects of gender-based policies in developing economies, developed recently in the context of a research project sponsored by the World Bank. The framework is based on analysis using a computable overlapping generation's model that accounts for the impact of access to infrastructure on women's time allocation, as well as human capital accumulation and inter- and intergenerational health externalities. The analysis also presents illustrative gender-based experiments in a calibrated version for a low-income country (Benin).