Publication: Beyond Ideological Cleavages: A Unifying Framework for Industrial Policies and Other Public Interventions
No Thumbnail Available
Date
2009
ISSN
09393625
Published
2009
Author(s)
Benhassine, Najy
Editor(s)
Abstract
This paper introduces a new framework to characterize the diversity of public policies and interventions to spur investment and growth. Going beyond ideological cleavages on this topic, we argue that two orthogonal features determine how much interventions depart fundamentally from neutral policies: (1) their degree of selectivity (in terms of sectors or other targeted categories of firms) and (2) the extent of price subsidies embedded in such interventions. These two characteristics of interventions respond to different types of justifications, and they do not necessarily need to go hand in hand, even if they often do in practice. Depending on their selectivity and/or the extent of price subsidies, interventions are shown to vary in their distortions, their benefits, and their opportunity costs. The framework is used to illustrate how different country characteristics affect these pros and cons of interventionism. In particular, we look at the effects of the initial state of the investment climate, the country's institutional capacity, its political economy context and the nature of the State-business interaction. Using the examples of poor countries with a small undiversified industrial base, we show that it is often in the situations where interventions may be the most needed, that the conditions for their success are likely to be the weakest, which does not mean either that some interventions cannot succeed in low-income countries.
Link to Data Set
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Citations
Collections
Related items
Showing items related by metadata.
Publication Montenegro : Beyond the Peak, Growth Policies and Fiscal Constraints, Public Expenditure and Institutional Review(Washington, DC, 2008-11)In 2007, Montenegro was one of the world's fastest growing non-oil economies. The country reaped the benefits from its comprehensive, pre-independence reform program. After the international recognition of statehood had removed the lingering uncertainty over Montenegro's political status, investors reassessed the country's relative attractiveness as a site for business, responding positively to (i) the implementation of the privatization and structural-reform agenda; (ii) the provision of a low-tax, pro-business environment; and (iii) a clearly defined European perspective. In response, investment surged. Capital inflows from foreign direct investment (FDI), largely absent during the first half of this decade, reached a level of 30 percent of Gross Domestic Product (GDP) in 2006 and 40 percent in 2007, fueling domestic demand and stimulating economic growth. Real GDP grew at double-digit rates in 2007, an outcome that stands in stark contrast to the period of economic anemia characterizing Montenegro's pre-independence years. In this buoyant environment, commercial banks supported private-sector activities with very large increases in credit to the economy. These helped to finance higher imports of goods and services, leading to a rapid widening in the current-account deficit from 8.5 percent of GDP in 2005 to 40 percent in 2007. The economic dynamism, exceeding all (published) projections, resulted in an unexpected abundance of fiscal revenues and with generally effective control over public expenditures in 2007, a very substantial overall surplus.Publication Upgrading the Investment Policy Framework of Public Pension Funds(World Bank, Washington, DC, 2008-01)Public pension funds have the potential to benefit from low operating costs because they enjoy economies of scale and avoid large marketing costs. But this important advantage has in most countries been dissipated by poor investment performance. The latter has been attributed to a weak governance structure, lack of independence from government interference, and a low level of transparency and public accountability. Recent years have witnessed the creation of new public pension funds in several countries, and the modernization of existing ones in others, with special emphasis placed on upgrading their investment policy framework and strengthening their governance structure. This paper focuses on the experience of four new public pension funds that have been created in Norway, Canada, Ireland and New Zealand. The paper discusses the safeguards that have been introduced to ensure their independence and their insulation from political pressures. It also reviews their performance and their evolving investment strategies. All four funds started with the romantic idea of operating as 'managers of managers' and focusing on external passive management but their strategies have progressively evolved to embrace internal active management and significant investments in alternative asset classes. The paper draws lessons for other countries that wish to modernize their public pension funds.Publication Guinea-Bissau - Cashew and Beyond : Diversification Through Trade - Diagnostic Trade Integration Study for the Enhanced Integrated Framework for Trade-related Technical Assistance(World Bank, 2010-05-01)Guinea-Bissau is highly dependent on international trade even when compared to other nations of its size and income level. However, it is equally clear that the country could derive far more benefit from its international trade opportunities than it does at the present time. This study examines how to do this, looking not only at trade policy, the investment climate, and infrastructure, but also five key sectors where specific opportunities exist. There are three recommendations which stand out as having a particularly important and pervasive effect on trade and its potential role in raising incomes and reducing poverty. Indeed, they can be regarded as preconditions for significant progress. Eliminating the bureaucratic obstacles to doing business is a prerequisite for any growth in private investment in the country. Guinea-Bissau ranks near the bottom of the World Bank's annual Survey of Doing Business, reflecting the extremely difficult bureaucratic and legal maze that must be dealt with by any entrepreneur seeking to operate a business in the country. This situation not only militates against private investment in any but resource extraction industries, but also makes even the simplest import/export operation an exercise in bureaucratic navigation. It is of primary importance that the job of formulating and implementing economic policy be put on a more stable and long term basis The extreme instability in Guinea-Bissau's government has meant that cabinet ministers and lower officials change on an annual or even more frequent basis. This situation makes long term planning and sustained implementation virtually impossible and the formulation of coherent policy equally difficult.Publication Development of Construction Industry : A Literature Review(2007-11-01)The construction industry in Pakistan is well aware of the challenges it faces and its issues, constraints, and recommendations are also well documented in reports published from time to time. This study shows that business environment (demand-side), Human Resources (HR), equipment and materials are key factors restraining growth therefore showing that there are no short-term fixes for these problems. A sustained long-term committed approach to developing the construction industry (contractors, consultants, and, clients) is of paramount importance. Considering the Government of Pakistan's (GoP) ambitious development plans for the coming years, innovative and out of the box solutions will be required to deliver the proposed infrastructure projects.Publication The Implementation of Industrial Parks : Some Lessons Learned in India(World Bank, Washington, DC, 2014-03)Industrial parks are as popular as they are controversial, in India and globally. At their best they align infrastructure provision and agglomeration economies to jolt industrial growth. More often, they generate negative spill-overs, provide handouts, sit empty, or simply do not get built. This paper disaggregates how parks are built and how they fail. It contextualizes parks in India, followed by a thick case study of an innovative scheme that appears to buck the trend. This performance is then explained by the way in which the scheme's design and action fit India's political economy. The paper concludes by considering how the analysis and the lessons learned might inform the design and implementation of industrial park programs and other public interventions, in India and elsewhere.
Users also downloaded
Showing related downloaded files
No results found.