1. Innovation and Growth in LAC: The Next Generation of Reforms
William F. Maloney
Office of the Chief Economist, LA, World Bank

2. Why Innovation Push Now?
Ongoing work
WBI: knowledge economy studies
HD: higher education projects
FPSI: E-gov, E-Bus.
Region- Preoccupation with slowed growth
Regional Flagships:
From Natural Resources to the Knowledge Economy… Why did LAC’s natural resources sectors underperform Scandinavia, Australia- Lack of innovative capacity
Closing the Gaps in Education and Technology-takes a closer look

3. TFP growth faster in agriculture than manufacturing.
Half of Growth is Total Factor Productivity

4. LAC- way below R&D Superstars

5. LAC’s efficiency of converting R & D into patents,TFP is also low
Patents = B1R&D + Bp country*R&D
20.00%
15.00%
10.00%
5.00%
0.00%
ARG
BRA
CHL
COL
CRI
MEX
PER
URY
VEN
TWN
KOR
ISR
FIN
NOR
-5.00%
-10.00%

6. National Innovation System
Global Knowledge Economy
Human Capital
Think Tanks/ Antenna
University
Innovation Clusters
Firms
Other Public Policies:
Rules of the Game Infrastructure (ICT) Subsidies/Tax incentives Coordination Initiatives
Innovation & TFP Growth
Global Knowledge Economy

7. Why is LAC not Finland? The challenge ahead
Weak human capital
Not addressing serious mkt failures in innovation
Few incentives to R & D - tax breaks, subsidies
Weak efforts to help firms learn
Incubators, research parks, consortia
Disfunctional NIS:
LAC’s NIS-closer to the Holy Roman Empire than Finland.
No mkt forces assure elements of NIS work together
Missing supporting markets-credit, labor

8. The Bank’s Challenge Hippocratic Oath- “First do no harm”
Mkt failures- last refuge of the interventionist scoundrel
Innovation: the Trojan horse of state discipline?
Bad incentives, institutions already implemented that will be hard to reform- U’s, public labs
Commit to a long dialogue
Know what we’re talking about!
Down to policy details
Do/sponsor the LDC research necessary and..
Get our models right:
What’s a knowledge economy anyway?
What the heck is high tech?

9. Deviations from expected level
Who Should LAC follow?
Deviations from expected level
Finland
Korea
FDI
R&D
License Payments
Fuente: Maloney (2004)

10. But Spain, Italy and Portugal follow a different path.
Chile
Spain
FDI
R&D
License Payments

11. FIN