William F. Maloney

Latin America has lost a century of growth due to its inability to learn: to identify, adapt, and implement new technologies emerging from the Second Industrial Revolution. Building learning economies will require increasing the demand for knowledge, facilitating new ideas, and supporting the ongoing process of experimentation.

This book documents frontier knowledge on the drivers of agriculture productivity to derive pragmatic policy advice for governments and development partners on reducing poverty and boosting shared prosperity. The analysis describes global trends and long-term sources of total factor productivity growth, along with broad trends in partial factor productivity for land and labor, revisiting the question of scale economies in farming. Technology is central to growth in agricultural productivity, yet across many parts of the developing world, readily available technology is never taken up. We investigate demand-side constraints of the technology equation to analyze factors that might influence producers, particularly poor producers, to adopt modern technology. Agriculture and food systems are rapidly transforming, characterized by shifting food preferences, the rise and growing sophistication of value chains, the increasing globalization of agriculture, and the expanding role of the public and private sectors in bringing about efficient and more rapid productivity growth. In light of this transformation, the analysis focuses on the supply side of the technology equation, exploring how the enabling environment and regulations related to trade and intellectual property rights stimulate Research and Development to raise productivity. The book also discusses emerging developments in modern value chains that contribute to rising productivity. This book is the fourth volume of the World Bank Productivity Project, which seeks to bring frontier thinking on the measurement and determinants of productivity to global policy makers.

The stagnation of productivity in the developing world, and indeed, across the globe, over the last two decades dictates a rethinking of productivity measurement, analysis, and policy. Reviving Global Productivity presents a “second wave” of thinking in three key areas of productivity analysis and its implications for productivity policies.The volume calls into question the measurement and relevance of distortions as the primary barrier to productivity growth, urges a broader concept of firm performance that goes beyond efficiency to quality upgrading and demand expansion, and explores what it takes to generate an experimental and innovative society where entrepreneurs have the personal characteristics to identify new technologies and manage risk within an entrepreneurial ecosystem that facilitates their doing so. It also reviews arguments surrounding industrial policies.The authors argue for an integrated approach to productivity analysis that incorporates both the need to reduce economic distortions and generate the human capital capable of identifying the opportunities offered to follower countries and upgrade firm capabilities. Finally, it offers guidance on prioritizing policies when there is uncertainty around diagnostics and limited government capability.

Economists have long argued that developing countries have the potential for high productivity growth if they adopt existing technologies and apply them to the local context. This report brings to bear a battery of new data sources to explore the innovation ""paradox"": despite the potential for very high returns, developing countries invest far less in adopting and inventing new processes and products than advanced countries. The report posits three broad factors underlying this paradox. The first is that firms in developing countries lack the managerial and technological capabilities to undertake meaningful innovation projects. This implies that conventional innovation policies are unlikely to be effective, and moving firms up the ""capabilities escalator"" becomes central. A second factor is that firm capability is only one of many critical ingredients - for instance, access to financial markets, macroeconomic stability, and imported machinery - that are complements to the innovation process, and whose absence lowers the return to innovation in developing countries. This implies that cultivating an effective innovation system will be a greater policy challenge, and that standard measures of innovation performance, such as research and development or GDP, are misleading. Finally, government capabilities required to redress these two points are also correspondingly weaker in developing countries, so building these capabilities needs to be explicitly integrated in formulating innovation policy.

Informality: Exit and Exclusion analyzes informality in Latin America, exploring root causes and reasons for and implications of its growth. The authors use two distinct but complementary lenses: informality driven by ""exclusion"" from state benefits or the circuits of the modern economy, and driven by voluntary ""exit"" decisions resulting from private cost-benefit calculations that lead workers and firms to opt out of formal institutions. They find both lenses have considerable explanatory power to understand the causes and consequences of informality in the region.""Informality: Exit and Exclusion"" concludes that reducing informality levels and overcoming the ""culture of informality"" will require actions to increase aggregate productivity in the economy, reform poorly designed regulations and social policies, and increase the legitimacy of the state by improving the quality and fairness of state institutions and policies. Although the study focuses on Latin America, its analysis, approach, and conclusions are relevant for all developing countries."" Informality: Exit and Exclusion"" will be of value to professionals and academics studying labor market, social protection, tax, microenterprise development, and urban public policies, and to those working in government, international organizations, research institutions, and universities.

That raising income levels alleviates poverty, and that growth can be more or less effective in doing so, is well known and has received renewed attention in the search for pro-poor growth. What is less well explored is the reverse channel - that poverty may, in fact, be part of the reason for a country's poor growth performance. This report is about the existence of these vicious circles in Latin America and about the alternatives to convert them into virtuous circles in which poverty reduction and high growth reinforce each other.

Analyzing the experience of Mexico under the North American Free Trade Agreement (NAFTA), the authors draw lessons for other countries considering free trade agreements with the United States. The authors conclude that NAFTA raised external trade and foreign investment inflows and had a modest effect on Mexico's average income per person. It is likely that NAFTA also helped achieve a modest reduction in poverty and an improvement in job quality. However, major obstacles remain to Mexico's long term development-NAFTA is not enough. The main lesson for other countries is that free trade agreements offer opportunities to accelerate economic growth, but do not guarantee it.

Analyzing the experience of Mexico under the North American Free Trade Agreement (NAFTA), the authors draw lessons for other countries considering free trade agreements with the United States. The authors conclude that NAFTA raised external trade and foreign investment inflows and had a modest effect on Mexico's average income per person. It is likely that NAFTA also helped achieve a modest reduction in poverty and an improvement in job quality. However, major obstacles remain to Mexico's long term development-NAFTA is not enough. The main lesson for other countries is that free trade agreements offer opportunities to accelerate economic growth, but do not guarantee it.