INNOVATION and INCLUSION in LATIN AMERICA Strategies to Avoid the Middle Income Trap

STUDIES OF THE AMERICAS INNOVATION AND INCLUSION IN LATIN AMERICA Strategies to Avoid the Middle Income Trap Edited by Alejandro Foxley and Barbara Stallings Studies of the Americas Titles in the Studies of the Americas Series include cross-disciplinary and comparative research on the United States, Latin America, the Caribbean, and Canada, particularly in the areas of Politics, Economics, History, Anthropology, Sociology, Development, Gender, Social Policy and the Environment. The series publishes edited collections, which allow explo- ration of a topic from several different disciplinary angles by eminent scholars; book-length studies providing a deeper focus on a single topic; and readers on specifi c themes. More information about this series at http://www.springer.com/series/14462 Alejandro Foxley • Barbara Stallings Editors Innovation and Inclusion in Latin America Strategies to Avoid the Middle-Income Trap Editors Alejandro Foxley Barbara Stallings CIEPLAN Watson Institute of International & Santiago , Chile Public Affairs Brown University Providence , Rhode Island , USA Studies of the Americas ISBN 978-1-137-59681-9 ISBN 978-1-137-59682-6 (eBook) DOI 10.1057/978-1-137-59682-6 Library of Congress Control Number: 2016940307 © The Editor(s) (if applicable) and The Author(s) 2016 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifi cally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfi lms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specifi c statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Nature America Inc. New York ACKNOWLEDGMENTS This book is the principal product of a collaborative project undertaken during 2013–2014 by American University’s Center for Latin American and Latino Studies (CLALS) in collaboration with the Corporation for Latin American Studies (Corporación de Estudios para Latinoamérica, CIEPLAN), with funding provided by the Offi ce of Strategic Planning and Development Effectiveness of the Inter-American Development Bank (IDB). The collaboration between CLALS and CIEPLAN has been intel- lectually fruitful and has resulted in a volume that we believe will be use- ful to a diverse array of stakeholders, in both academic and practitioner circles, who seek to better understand opportunities and challenges for the development agenda in Latin America and the Caribbean as the region endeavors to move beyond middle-income status and join the ranks of advanced economies. A Spanish-language version of this volume, titled Economías latinoamericanas: Cómo avanzar más allá del ingreso medio , was published by CIEPLAN in December 2014, though substantial revisions have been made in this current version. Project research was directed jointly by Barbara Stallings, a CLALS- affi liated researcher on the faculty at Brown University, and Alejandro Foxley, the president of CIEPLAN. Stallings and Foxley, with support from staff at both American University (AU) and CIEPLAN, recruited a number of leading researchers to carry out studies on particular themes. Some of those experts were based at AU, others at CIEPLAN, and we supplemented that core team with economists and sociologists drawn from additional institutions from throughout the Americas and Asia. We worked with contributors intensively over the course of the yearlong ini- v vi ACKNOWLEDGMENTS tiative to hone their draft papers so as to better integrate them with one another and constitute a synthetic rather than disparate collection of essays on Latin America’s emerging economic challenges and the lessons to be derived through comparisons both within and beyond the region. An initial step was to draw on preliminary results of the research that we commissioned in 2013, as well as an extensive review of available lit- erature and an iterative process of consultations with experts and policy makers, to prepare an overview paper presenting critical challenges for Latin American development and potential approaches to addressing them during the coming years. Alejandro Foxley took the lead in elaborating successive drafts of that study, which were presented in numerous IDB- convened events, particularly a series of consultations convened by IDB President Luis Alberto Moreno, who has been an unwavering supporter of our efforts. The fi nal version of Foxley’s study is presented as the second chapter of this book. AU and CIEPLAN researchers coordinated our efforts closely, but there was a clear division of labor: CIEPLAN focused its efforts largely on South America, while AU addressed dynamics in Mexico and the rel- evance of East Asian experiences for strategies aimed at combining growth and inclusion in Latin America. Initial drafts of papers were discussed at CIEPLAN in Santiago, Chile in January 2014, and advanced drafts were reviewed in a workshop that we held at AU in Washington, DC in late May 2014. During our participation in IDB-sponsored meetings, we tried to hone in as much as possible on the policy implications of our inquiries, and we hope that this is evident in the book. Toward this end, feedback from readers drawn from the ranks of senior staff at the IDB assisted us in making decisions about fi nal revisions to the papers. Conversations with our interlocutors at the IDB as well as our own interactions over the course of the project have also helped us to identify directions for future collaborations between AU and CIEPLAN, plans for which are advancing productively. We hope that these may also offer opportunities to partner with researchers in East Asia who have delved into the factors that enabled countries in the region to traverse paths that many Latin American countries aspire to emulate, adjusting to the particular historical, political, and economic societal characteristics of their societies. A core mission of both the Center at AU and CIEPLAN is to conduct state of the art research on economic growth and distribution and to disseminate the fi ndings of such investigations as widely as possible. We are especially grateful to President Moreno and to the IDB staff who have ACKNOWLEDGMENTS vii facilitated our efforts to do so through this specifi c project, and special thanks is due to Veronica Zavala and Maria Camila Uribe, who have been particularly crucial supporters of our work. While they are not responsible for any oversights or omissions in this study, we are cognizant of the role that they and their colleagues have played in helping us to cover a broad range of critical issues. We also express our gratitude to Sara Doskow, Chris Robinson, and their colleagues at Palgrave Macmillan, who have played a key role in helping us disseminate our research fi ndings and have provided effi cient and timely assistance throughout the manuscript prepa- ration process. We believe, based on the reception of our work during a number of IDB-sponsored events, that the products of our effort provided a valuable external input into the strategic planning exercise that the IDB was undertaking during 2013–2014 and that are expected to shape its agenda during the coming years. It has been a privilege for both CLALS and CIEPLAN to have contributed to such an important process. We look forward to future opportunities to pursue common research agendas in order to shed light on the pressing analytic and policy issues that confront observers determined to impact understanding of how Latin American economies can learn from success cases across the region, as well as from valuable experiences that have unfolded in other parts of the world. As we await those opportunities, our hope is that this book will provide a mod- est contribution to debates about where the region fi nds itself in 2016 and how it needs to innovate in order to move forward. We hope as well that our contribution will advance scholarly inquiries into the factors that will determine whether Latin America proceeds along a path conducive to escaping the middle-income trap, which condemns societies to insuffi cient growth and inadequate social inclusion, toward a future that combines prosperity with enhanced welfare for the majority of the inhabitants of the region. CONTENTS 1 Innovation, Inclusion, and Institutions: East Asian Lessons for Latin America? 1 Barbara Stallings 2 Inclusive Development: Escaping the Middle-Income Trap 33 Alejandro Foxley 3 Industrial Upgrading and Innovation Capability for Inclusive Growth: Lessons from East Asia 59 Keun Lee 4 Perspectives on Latin American Technological Innovation 91 Patricio Meller and Joaquín Gana 5 Policies and Institutions for Driving Innovation in Latin America 117 Gonzalo Rivas 6 Productivity, Education, and the Economic Inclusion of Workers and Small Firms in East Asian Development 143 Frederic C. Deyo ix x CONTENTS 7 Integration, Productivity, and Inclusion in Mexico: A Macro Perspective 177 Robert A. Blecker 8 Middle Classes and Education in Latin America 207 Osvaldo Larrañaga and María Eugenia Rodríguez Index 229 LIST OF CONTRIBUTORS Robert A. Blecker is Professor of Economics and an affi liated faculty member at the Center for Latin American Studies at American University in Washington, DC.

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