Economic Development and Structural Change Window 4 Ann Harrison, Director of Development Policy DECVP

Recall some of the Objectives of the Research for Window IV Understanding the relationship between structural change and broader development goals (Lin 2009), including poverty reduction (China versus India) Role of states, markets and the private sector in promoting structural transformation Appropriate policies for supporting structural change at each stage of development: from “no one size fits all” to “which policy for which level of development?” Governance issues for industrial upgrading and structural change

Donor Pledges (As of April 21, 2010) KCP II UK with GBP 500,000, funds already received CIDA with CAD 300,000, donor has signed the legal agreement China MoF with USD 500,000, signed Singapore with USD 300,000, signed Denmark with DKK 5 Million, in progress PHRD Japan is funding the Africa Industrialization project through the PHRD with USD 3,260,000

Breadth of New Research We will review some proposed and ongoing research on 1. Data collection for facts on structural transformation and linkages to country policies 2. Determinants of Industrial Upgrading 3. Role of States versus Markets 4. Case Study Evidence on Industrial Transformation 5. African Industrialization

1. Data Collection for facts on structural transformation and links to country policies Up-to-date datasets to be created on labor and capital stocks, factor shares, and sectoral breakdowns Proposed “data resource center for new structural economics” will leverage DEC’s development data platform (DDP) to provide new datasets on the above variables, as well as information from UNIDO, ILO, UNCTAD, and elsewhere Linkages to country policies, as well as firm-level analysis and data collection providing micro foundations of productivity growth by analyzing entry, exit, and reallocation Collection of data on export transactions and facts on entry and exit into exporting across developing countries

2. Determinants of Industrial Upgrading

3. Role of States versus Markets Belief in market mechanism as an indicator of comparative advantage, and importance of competition, investment climate BUT many areas where facilitating state plays an important role in process of structural transformation Infrastructure, human capital formation, services More controversial: industrial policy (IP) Where and how can IP succeed?

4. Case Study Evidence on Industrial Transformation Case studies allow us to understand more deeply “how” transformation occurs, and the institutional details necessary to make it happen In which sectors did take-off happen? If some sectors are targeted, which are they and why? Do governments have “exit strategies” to make sure losing firms are not supported indefinitely? What kinds of policies are most effective in promoting industries (ie exchange rates, infrastructure spending, tax holidays, industrial zones)?

5. African Industrialization Question: how can countries make the structural transformation out of agriculture and commodity, resource-based economies? Fact: Average productivity in agriculture perhaps 1/8 as high as rest of economies, but 60 percent of population in agriculture. What are barriers or obstacles that leave so many people in quasi-subsistence agriculture? How can these constraints be relaxed? What are barriers to industrial growth? Surveys and experiments Proposed project evaluating the effectiveness of matching grant programs for four sub-Saharan African countries, designed to encourage SMEs to purchase specialized services such as training for employees, implementation of standards and quality certification Firms surveys to identify constraints to expansion and introduction of new products Identification of both traditional and non-traditional constraints, exploring ways to encourage entrepreneurs Use of benchmarking and value-chain analysis, as well other methods, to explore which types of products could be produced but are not

Impact, Dissemination, and Collaboration Impact: seminars, conferences planned on topic of structural transformation and industrial policy outside of DECVP PREM Conference June 2010 Structural Change Pre-Conference September 2010 Conference on Lessons for Agriculture, UC Berkeley, September 2010 Dissemination: Speech by President Zoellick discusses this research agenda (late May- early June) Dissemination: Session at Annual Bank Conference on Development Economics in Stockholm, May 31-June 2 Dissemination: two sessions planned at American Economic Association Meetings in Denver, early 2011 Session on “Structural Transformation” Session on “Industrial Policy” Collaboration with academics from various universities and countries Collaboration with Africa Region Collaboration initiated by head of IFPRI, Shenggen Fan, and Research Director Margaret McMillan