Commission on Growth and Development

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The Growth Commission’s reports identify the ingredients that, if used in the right country-specific recipe, can deliver growth and help lift populations out of poverty. The Commission, consisting of 19 experienced leaders and 2 Nobel prize-winning economists, has released several commission reports, thematic volumes, and background working papers. The spring 2010 volume is the final book from the Commission. The Commission is succeeded by The Growth Dialogue.

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    Public Finance and Economic Development: Reflections Based on the Experience in China
    (World Bank, Washington, DC, 2009) Gordon, Roger H.
    Low tax revenue and slow economic growth are two central concerns in developing countries. However, policies that raise tax revenue also harm economic growth. With tax revenue coming mainly from large capital-intensive firms, and with a large informal sector, policies that aid large firms and policies that discourage entry of new firms both help increase tax revenue. Entrepreneurial activity as a result is discouraged, lowering growth. There is a basic tension in policy design between current tax revenue and economic growth. In fact, a loss in tax revenue can itself reduce growth, due to less spending on education and infrastructure. It can also undermine political support for the reforms from the poor and from government bureaucrats, both of whom are key beneficiaries of government expenditures. What policies encourage growth without undue loss of current expenditures? One is debt finance, but this creates the risk of a financial crisis if tax revenue rises too slowly to repay this debt. A second is user fees, but such fees still undermine political support from the poor. A third is partial reform, maintaining both higher taxes on and some protection for easily taxed firms, even while barriers to entry are eased.
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    Making Difficult Choices: Vietnam in Transition
    (World Bank, Washington, DC, 2008) Rama, Martin
    After decades of war, with a dilapidated infrastructure and millions of people dead, wounded or displaced, Vietnam could have been considered a hopeless case in economic development. Yet, it is now about to enter the ranks of middle-income countries. The obvious question is: How did this happen? This paper goes one step further, asking not which policies were adopted, but rather why they were adopted. This question is all the more intriguing because the process did not involve one group of individuals displacing another within the structure of power. To answer this question, the paper relies on the insights of those who were actually involved in the economic experiments, conceptual discussions, and political maneuvering that led to the adoption of key reforms. Especially, it builds on a series of long and regular conversations with H. E. the late Vo Van Kiet, one of Vietnam's leading figures. In doing so, it brings into the open the inside story of Doi Moi, a process that is not known by outsiders and remains opaque to most Vietnamese. The relevance of this exercise is not merely historical. Understanding how reforms were engineered may yield valuable lessons for other developing countries. It is also relevant for Vietnam, as two decades of rapid economic growth have resulted in dramatic changes in its economy and society. While praising the decision-making processes that allowed Vietnam to successfully emerge from poverty, the paper also explores the adjustments that could be needed for it to become an industrial country.