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PublicationMaking Global Value Chains Work for Development(World Bank, Washington, DC, 2014-05) Taglioni, Daria; Winkler, DeborahGlobal value chains (GVCs) are playing an increasingly important role in business strategies, which has profoundly changed international trade and development paradigms. GVCs now represent a new path for development by helping developing countries accelerate industrialization and the servicification of the economy. From a firm perspective, production in the context of GVCs highlights the importance of being able to seamlessly connect factories across borders, as well as protect assets such as intellectual property. From the policy maker perspective, the focus is on shifting and improving access to resources while also advancing development goals, and also on the question of whether entry into GVCs delivers labor-market-enhancing outcomes for workers at home, as well as social upgrading. GVCs can lead to development, but, at the country level, constraints such as the supply of various types of labor and skills and inadequate absorptive capacity remain. GVCs can create new opportunities on the labor demand side, but supply and demand cannot meet if the supply is missing. This potential gap illustrates the importance of embedding national GVC policies into a broader portfolio of policies aimed at upgrading skills, physical and regulatory infrastructure, and enhancing social cohesion. PublicationInclusive Growth Revisited: Measurement and Determinants(World Bank, Washington, DC, 2013-07) Anand, Rahul; Mishra, Saurabh; Peiris, Shanaka J.The call for inclusive growth has been unanimously broadcasted by policy makers across the world. The Arab spring, the growing divide between Main Street and Wall Street in advanced economies, and the three-speed world economy have placed inclusive growth at the forefront of policy debates. However, efforts to measure and assess the determinants of inclusive growth have remained limited. What is inclusive growth? How can the micro and macro dimensions of inequality and growth be integrated to reflect both the pace and distribution of economic growth? What has driven inclusive growth in emerging markets? PublicationChanging for the Better: The Path to Upper-Middle-Income Status in Uzbekistan(World Bank, Washington, DC, 2013-06) Trushin, Eskender; Carneiro, Francisco G.As a low-middle-income country with a gross domestic product (GDP) per capita of US$1,715 and a population of 30 million (nearly half of all of the Central Asian population), Uzbekistan has seen stable economic progress since the mid-2000s, both in terms of growth and poverty reduction. Growth has averaged 8 percent per year since 2004 and extreme poverty has declined from 27 percent in 2000 to 15 percent in 2012. Encouraged by this outstanding growth performance, the Uzbek authorities have set an ambitious goal for the country, to join the group of upper-middle-income countries by 2030. This note discusses the main challenges that the government is likely to face and the structural transformations that the economy will have to undergo to achieve this objective. PublicationHow to Avoid Middle-Income Traps?: Evidence from Malaysia(World Bank, Washington, DC, 2013-06) Flaaen, Aaron; Ghani, Ejaz; Mishra, SaurabhMalaysias structural transformation from low to middle income has made it one of the most prominent manufacturing exporters in the world. However, in the competitive global economy, like many other middle-income economies, it is sandwiched between low-wage economies on one side and more innovative advanced economies on the other. What can Malaysia do? Does Malaysia need a new growth strategy? PublicationInvestment Financing in the Wake of the Crisis: The Role of Multilateral Development Banks(World Bank, Washington, DC, 2013-06) Chelsky, Jeff; Morel, Claire; Kabir, MabrukSustained growth in emerging markets and developing economies requires long-term, reliable capital to finance productive investment, including in basic infrastructure. However, the availability and composition of long-term financing is constrained, partly due to fragile market conditions and cyclical weaknesses in parts of the global economy, as well as longer-term trends. This has had a particularly negative impact on developing economies that do not have reliable access to international bond markets and on sectors that have traditionally relied on bank lending (such as infrastructure). At the same time, fiscal space has been eroded by the crisis, and the direct lending capacity of Multilateral Development Banks (MDBs) remains constrained. This heightens the importance of the catalytic role of the official sector in mobilizing long-term financing from the private sector by drawing on its ability to reduce and share risk. This note explores some of the ways in which MDBs are equipped to serve this purpose. PublicationFrom Imitation to Innovation : Public Policy for Industrial Transformation(World Bank, Washington, DC, 2013-05) Agénor, Pierre-Richard; Dinh, Hinh T.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. PublicationAsset Prices, Macro Prudential Regulation, and Monetary Policy(World Bank, Washington, DC, 2013-05) Canuto, OtavianoConfidence in combining inflation-targeting-cum-flexible-exchange-rate regimes with isolated micro prudential regulation as a means to guarantee both macroeconomic and financial stability has been shattered by the scale and synchronization of the asset price booms and busts that preceded the global financial crisis. It has now become clear that if monetary policy makers and prudential regulators are to succeed in achieving stability, there can be no complacency regarding asset price cycles. This note explores some of the ways in which monetary policy can address asset price booms and busts through its integration with macro prudential regulation. PublicationA Changing China : Implications for Developing Countries(World Bank, Washington, DC, 2013-05) Schellekens, PhilipThree decades of rapid growth and structural change have transformed China into an upper-middle-income country and global economic powerhouse. China's transformations over this period wielded increasing influence over the development path of other countries, either directly through bilateral trade and financial flows or indirectly through growth spillovers and terms of trade effects. Looking ahead, as China embarks on a new phase in its development journey, a phase characterized by slower but higher-quality growth, the economic landscape facing the developing world is expected to be redefined yet again. As China changes, so will its interactions with the outside world. China is expected to remain both a market and a competitor, but its changes are likely to lead to new opportunities for many and new challenges for some. Key questions in this respect are: (i) how will the level and composition of China's import demand evolve as its economy slows and rebalances; (ii) to what extent will the presumed out-migration of labor-intensive manufacturing materialize and create new opportunities elsewhere; and (iii) how quickly will China move up the value chain and redefine its competitive advantage in the global marketplace? How these uncertain long-term developments affect individual countries will depend on differences in total supply chain costs, resource availability, and innovation capability. As in the past, China's transformations are expected to put formidable pressure on countries to adapt and reform, requiring both political will and entrepreneurial capacity, in a collective race where success will be measured against a rapidly moving frontier. PublicationCan Trade Reduce Poverty in Africa?(World Bank, Washington, DC, 2013-04) Le Goff, Maëlan; Singh, Rajun JanWhile most economists accept that, in the long run, open economies fare better in aggregate than closed ones, many fears that trade could harm the poor. African countries, for example, have realized significant improvements in trade liberalization in recent decades, yet Africa remains the poorest continent in the world. It seems that the large gains expected from opening up to international economic forces have been limited in Africa, especially for poor people. Drawing on the findings of a recently published working paper (Le Goff and Singh 2013), this note argues that the benefits of trade are not automatic, but rather depend on accompanying policies aimed at developing the financial sector, promoting primary education, and improving governance. This accompanying policy agenda allows people to take advantage of the opportunities offered by freer trade, by reallocating resources away from less productive activities to more promising ones. Trade liberalization therefore should not be implemented on its own, but with the necessary complementing policies. PublicationGlobal Connectivity and Export Performance(World Bank, Washington, DC, 2013-03) Arvis, Jean-FrançoisThe World Bank has developed a novel method for measuring countries connectivity in global networks and has applied it to the global air transport network. Connectivity in this context is defined as a country s relative position in that network in terms of the total push and pull it exerts on air traffic, taking account of all possible links with other countries. Well-connected countries that are strongly connected to other well-connected countries are considered hubs in this definition. Less well-connected countries are spokes. The Air Connectivity Index (ACI) shows that connectivity is highly concentrated in North America and Europe ( hubs ); most developing countries are relatively poorly connected ( spokes ). Developing countries looking to increase their participation in global value chains need to improve their connectivity as part of their overall competitiveness strategy, including the progressive liberalization of their air transport sectors.