From Commodity Booms to the Knowledge Economy

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From Commodity Booms to the Knowledge Economy

• Center for Hemispheric Policy, May 2008
• W. F. Maloney
• Office of the LAC Chief Economist
• Latin America and the Caribbean Region
• The World Bank

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The commodity boom has been kind to Latin America
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And a large share of the recent high growth rates
are due to this good luck
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The question Can Latin America turn this luck
into sustained growth?
Source Calderon, Fajnzylber y Loayza (2002)
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..And are we back to Prebischs concerns with our
economic structure?

• The resource curse is probably a mythbut LA
  underperforms in all sectors
• Forestry
• remains a dynamic sector in Sweden, and Finland.
  ..but Brazil or Chile?
• 1944 Haig report Chile tremendous forestry
  potential didnt appear

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LA under-performs

• Minerals can lead to dynamic industries
• Norway shows US petroleum based success
  replicable
• Discovers petroleum in 1969, now exports
  platforms Norwegian school of thought in oil
  exploration.
• Australia-exports more mining expertise than wine
• But LA stagnated
• Brazil, Peru mining underperformers Wright
  (2001).
• Chile Australias BHP discovered la Escondida
• Agriculture TFP growth faster in agriculture
  than manufacturing.. But LA underperforms in both

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including high tech goods
Comparative Advantage in Innovation
Brazil Airplanes
3.5!!!
Taiwan Computers
Mexico Computers
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Innovation is Central Forestry remains a dynamic
sector in Sweden, Finland
Nokia Site of an early pulp mill in
Finland Learn how to learn
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Its not so much what we produce, but that were
not producing at world class levels.. Why?
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Deep historical roots We started behind in
literacy
Sources  Mariscal and Sokoloff 2000, and
Meredith 1995, Maloney 2007
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and valued poetry over engineering
Sources  Maloney 2007
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We continue to under perform in education quality
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LAC underperforms in RD
Source Lederman and Maloney 2002 RD and
Development
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And what we invest generates little knowledge or
growth
Patents B1RD Bp CountryRD
Bosch, Lederman and Maloney (2007)
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Partly because of low academic quality and weak
collaboration between university and firm
(interviews with entrepreneurs scale 1-7)
Source World Economic Forum
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Latin Students Abroad Still Condemned to
Solitude?
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Challenges to Reform

• Lack of consensus on importance
• Chile, yes
• Mex, Col, Br- noise but not yet coherent
• Consensus, but difficult political economy
• Chile- all agreed on macro, but micro haunted by
  the ghosts of 73
• Mex-balkanized policy making
• US-LA post 08 An Alliance for Productivity?

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End