Business Support Policies : Large Spending, Little Impact
The focus of this paper is on policies that ought to support productivity, output and employment growth. This support can be direct and indirect, targeted to specific sectors or types of firms or wide ranging. The presence of externalities is the m...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/458011511799140856/Business-support-policies-large-spending-little-impact http://hdl.handle.net/10986/28946 |
| Summary: | The focus of this paper is on policies
that ought to support productivity, output and employment
growth. This support can be direct and indirect, targeted to
specific sectors or types of firms or wide ranging. The
presence of externalities is the main theoretical
justification for deviating from policy neutrality if
enhancing economic efficiency is the policy objective.
Policies seeking to correct efficiency-related market
failures could, for instance, support local within-sector
Marshallian externalities or intra-sector spillovers,
collective action to overcome sector-specific coordination
failures, and the promotion of information spillovers
associated with self-discovery and product diversification,
based on static or dynamic knowledge, learning or other
positive externalities (Harrison and Rodriguez-Clare, 2010).
The presence of market failures is only a necessary and not
sufficient rationale for government intervention. It is also
important to ensure that the benefits to the economy from
any intervention outweigh the associated costs including the
costs of any government failures in the design and
implementation of the intervention - linked among others to
imperfect information by government of productivity-related
firm needs, government capture and the creation of rents as
well as outright corruption (Hevia et al., 2017). |
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