Person: Fay, Marianne
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Economic Structure, Productivity, and Infrastructure Quality in Southern Mexico
2002-10, Deichmann, Uwe, Fay, Marianne, Koo, Jun, Lall, Somik V.
There are large and sustained differences in the economic performance of sub-national regions in most countries. The authors examine the economic structure and productivity in Southern Mexico and compare it with the rest of the country. The authors use firm level data from Mexican manufacturing to test the relative importance of firm level characteristics (such as human capital and technology adoption) compared with external characteristics (such as infrastructure quality and regulatory environment) in explaining productivity differentials. The authors find that the economic structure of Southern Mexico is considerably different from the rest of the country, with the economic landscape dominated by micro enterprises and a relative specialization in low productivity activities. This, coupled with low skill levels and fewer skill upgrading opportunities, reduces the performance of Southern firms. Productivity differentials between Southern firms and others, however, only exist for micro enterprises. The econometric analysis shows that while employee training and technology adoption enhance productivity, access to markets by improving transport infrastructure that link urban areas also have important productivity effects.
Infrastructure in Latin America and the Caribbean : Recent Developments and Key Challenges
2007, Fay, Marianne
This book reviews Latin America's experience with infrastructure reform over the last fifteen years. It argues that the region's infrastructure has suffered from public retrenchment and unrealistic expectations about private involvement. Poor infrastructure now hampers productivity, growth, and poverty reduction. Addressing this requires more and better spending, and acceptance that governments remain central to infrastructure provision and supervision, although the private sector still has an important role to play.
Rising Incomes and Inequality of Access to Infrastructure among Latin American Households
2017-02, Straub, Stephane, Fay, Marianne
This paper documents access to services and ownership of infrastructure-related durables in the water, energy, telecom, and transport areas, based on harmonized household survey data covering 1.6 million households in 14 Latin American countries during 1992 to 2012. The paper provides a systematic disaggregation of access and ownership rates at different levels of income and over time, and econometrically derives the country infrastructure premium, a measure of how much a household benefits from simply being located in a given country. The results show extensive inequality of access, within countries across the income distribution, but also across countries for households at similar levels of income. For water and electricity, for example, up to two-thirds of the variability in individual percentile access to infrastructure services and consumption of related assets can be explained by country residence only. In addition, few country fundamentals appear to be significant in explaining this variability, pointing to policy differences as an important determinant. The paper derives the income elasticity of infrastructure access for the full set of indicators, and uses these to estimate the time that would be needed to close the remaining gap for households at different levels of the income distribution under a "business as usual" hypothesis. Under that scenario, universal access appears to be decades away for many countries in the region. The last part discusses the policy challenges, arguing that in a context in which public budgets face strong constraints and significant increases in private investment are unlikely to be forthcoming, a large part of the solution lies in refocused investment strategies, better demand management, and improved public spending efficiency.
Infrastructure in Latin America : Recent Developments and Key Challenges, Volume 1
2005-08, Morrison, Mary, Fay, Marianne
In the last decade, most countries in Latin America and the Caribbean (LAC) have not spent enough on infrastructure. Total investment has fallen as a percentage of GDP, as public infrastructure expenditure has borne the brunt of fiscal adjustment, and private investment has failed to take up the slack. Most infrastructure services have therefore lagged behind East Asian comparators, middle income countries in general and China, in terms of both coverage and quality, despite the generally positive impacts of private sector involvement. This lackluster performance has slowed the LAC region's economic growth and progress in poverty reduction. Countries of the region therefore need to focus on upgrading their infrastructure, as this can yield great dividends in terms of growth, competitiveness and poverty reduction, as well as improving the quality of life of their citizens. Catching up requires significant new investment. But first, measures need to be taken to ensure that infrastructure spending produces higher returns, both economic and social. Both these tasks involve multiple challenges. The first section of the main report reviews progress made in infrastructure coverage and quality and discusses the impacts this has had on growth, competitiveness and the fight against poverty. The second section argues that the main issue has been that there has not been enough improvement in the management of resources, which have been insufficient anyway, and also reviews the region's experiences with private participation in infrastructure. The third section builds on the lessons of the last decade to tackle the key challenges: improving social and economic returns from infrastructure, managing private participation in infrastructure better and raising new finance for infrastructure.
Rethinking Infrastructure in Latin America and the Caribbean: Spending Better to Achieve More
2017-07-18, Fay, Marianne, Andres, Luis Alberto, Straub, Stephane, Narloch, Ulf
Latin America and the Caribbean (LAC) does not have the infrastructure it needs, or deserves, given its income. Many argue that the solution is to spend more; by contrast, this report has one main message: Latin America can dramatically narrow its infrastructure service gap by spending efficiently on the right things. This report asks three questions: what should LAC countries’ goals be? How can these goals be achieved as cost-effectively as possible? And who should pay to reach these goals? In doing so, we drop the ‘infrastructure gap’ notion, favoring an approach built on identifying the ‘service gap’. Benchmarking Latin America in this way reveals clear strengths and weaknesses. Access to water and electricity is good, with the potential for the region’s electricity sector to drive competitive advantage; by contrast, transport and sanitation should be key focus areas for further development. The report also identifies and analyses some of the emerging challenges for the region—climate change, increased demand and urbanization—that will put increasing pressure on infrastructure and policy makers alike. Improving the region’s infrastructure performance in the context of tight fiscal space will require spending better on well identified priorities. Unlike most infrastructure diagnostics, this report argues that much of what is needed lies outside the infrastructure sector – in the form of broader government issues—from competition policy, to budgeting rules that no longer solely focus on controlling cash expenditures. We also find that traditional recommendations continue to apply regarding independent, well-performing regulators and better corporate governance, and highlight the critical importance of cost recovery where feasible and desirable, as the basis for future commercial finance of infrastructure services. Latin America has the means and potential to do better; and it can do so by spending more efficiently on the right things.
The Urban Poor in Latin America
2005, Fay, Marianne, Fay, Marianne
With three quarters of its population living in cities, Latin America is now essentially an urban region. Higher urbanization is usually associated with a number of positives, such as higher income, greater access to services, and lower poverty incidence, and, Latin America is no exception. Today, urban poverty incidence, at 28 percent, is half that of in rural areas; extreme poverty, at 12 percent, is a third. Despite this relatively low poverty incidence, the absolute number of poor people is high, and most studies agree that about half of Latin America's poor live in urban areas. The Bank's own estimates suggest that 60 percent of the poor (113 million people) and half the extreme poor (46 million individuals) live in urban areas. The report reviews what is specifically urban about poor people living in cities, which reveals a number of facts, critical to understanding the challenges facing the urban poor, and the means to address these challenges. Three preconceived ideas are discussed, that tend to cloud judgment about urban poverty. All three spring from the common misperception that urban statistics are representative of the urban poor. However, the relatively low incidence of poverty in cities, combined with Latin America's high inequality, imply urban statistics are almost never representative of the urban poor. Concerning the differences between urban and rural poor, the need for differentiated strategies to tackle urban as opposed to rural poverty is implied, and, the first and most important differential is the greater integration of the urban poor into the market economy. Second, while urban areas are not systematically unequal than rural areas - it depends on the country, and, within countries, on the city - they are much more heterogeneous socio-economically, or with respect to economic activities and processes. Third, heterogeneity notwithstanding, Latin American cities tend to be highly segregated. As a result, social exclusion coexists with (relative) physical proximity to wealth, services and opportunities. This gives rise to negative externalities, or neighborhood effects that result in a lower ability to access jobs, lower earnings, and lower educational achievements. Fourth, social networks are less stable in urban areas, with relationships based more on the quality of reciprocal links between individuals and friends, than on familial obligations. Fifth, urban living also means much greater exposure to organized crime, drugs and gang violence. This is true for the population as a whole, but it has particularly dismal implications for the poor living in the slums of Latin America's large cities, where drug-traffic is now pervasive. Finally, another important characteristic of urban poverty has to do with overwhelmed, rather than absent services. The underlying hypothesis of this report is that, indeed, the causes of poverty, the nature of deprivation, and the policy levers to fight poverty are, to a large extent, site specific.