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Financial Sector

We know very little about what makes innovation policy work: Four areas for more learning

Xavier Cirera's picture


Photo Credit: Innovation Growth Lab.

Whether in Silicon Valley or Kenya’s furniture sector, innovation is a critical driver of job creation and economic growth. It could be a mobile app to connect farmers and buyers of agricultural products. Or perhaps an efficient and affordable solar roof tile. Innovation comes in many forms, from products and services to business models.

Yet despite the growing investment in policies to support innovation, we know surprisingly little about what makes these policies effective. To advance understanding of what works in innovation policy, Nesta, in collaboration with the Kauffman Foundation and the World Bank Group, organized the recent Innovation Growth Lab (IGL) Global Conference in London. The mission of IGL is to promote evidence-based innovation and entrepreneurship policies by funding randomized controlled trials (RCTs) and testing new policy approaches.
 
The conference was successful in discussing both research and policy challenges — a welcome change from typical innovation conferences, which often focus on either academia or policy.

Chasing shadows: Tax strategies to tackle the shadow economy

Rajul Awasthi's picture
Digital work by Steve Johnson

Tax administrations in developing countries are increasingly concerned about the persistent problem of loss of tax revenues to the shadow economy, and they often deploy a range of strategies to plug tax leaks and augment revenues. The erosion of the tax base prevents governments from collecting the revenue it needs to provide essential services, such as healthcare, road construction, and education. Nonetheless, it’s a sticky problem: how do you convince business owners to pay taxes?
 
Some possible answers, bolstered by evidence, include: simplify tax payment and provide incentives to formalize businesses. The World Bank’s Governance Global Practice will hold a conference between June 27-29 in St Petersburg, Russia, to bring together participants from almost 25 countries of the Europe and Central Asia region to discuss these issues under the aegis of the Tax Administrators eXchange of Global Innovative Practices, a peer-learning network of tax administrators. The event will be hosted by experts from the Public Sector Performance division of the practice.

Renewables, solar, and large size projects trending in new data on private participation in infrastructure

Clive Harris's picture



Translations available in Chinese and Spanish.

Many of you are already familiar with the PPP (Public-Private Partnerships) Group’s Private Participation in Infrastructure (PPI) Database. As a reminder for those who aren’t, the PPI Database is a comprehensive resource of over 8,000 projects with private participation across 139 low- and middle-income economies from the period of 1990-2015, in the water, energy, transport and telecoms sectors.

We recently released the 2015 full year data showing that global private infrastructure investment remains steady when compared to the previous year (US$111.6 billion compared with US$111.7 the previous year), largely due to a couple of mega-deals in Turkey (including Istanbul’s $35.6 billion IGA Airport (which includes a $29.1 billion concession fee to the government). When compared to the previous five-year average, however, global private infrastructure investment in 2015 was 10 percent lower, mainly due to dwindling commitments in China, Brazil, and India. Brazil in particular saw only $4.5 billion in investments, sharply declining from $47.2 billion in 2014 and reversing a trend of growing investments over the last five years.

Can wage subsidies boost employment in the wake of an economic crisis?

Miriam Bruhn's picture

Unemployment often rises during an economic crisis and policymakers take a range of actions to try to mitigate this increase. For example, 22 countries around the world used some form of wage subsidy program to promote employment retention during the recent crisis. Many studies have looked at the effect of wage subsidies on employment in non-crisis times, with mixed findings. But, there is not much evidence on whether wage subsidies can raise employment in the wake of a crisis.

Conceptually, wage subsidies during a crisis may make sense since layoffs could slow down the recovery as re-hiring and training workers may be costly for firms. This is particularly true for workers with job-specific skills. For these workers, it may be beneficial for firms to not let them go in the first place. However, as firms face lower demand for their products, they may not have the financial means to keep paying these workers, particularly in the presence of credit constraints, which are often exacerbated during a crisis. This is where wage subsidies come in. But, ultimately, we just don’t know whether these subsidies really cause firms to retain workers they otherwise would not have retained.

Managing sudden stops

Poonam Gupta's picture

The recent reversal of capital flows to emerging markets has pointed to the continuing relevance of the sudden stop problem when capital inflows dry up abruptly.

In a recent paper  as well as a  Vox column, we analyze these episodes in emerging markets over the past quarter century. We contrast their incidence, impact, correlates, and policy response before and after 2002, and establish similarities as well as differences.

Real-time data as an early warning signal

Fida Rana's picture

The risks inherent in public-private partnerships (PPPs) are real. These long-term projects require substantial investment: typically, PPP project funding structures constitute 70 to 80 percent debt, with the remaining coming from equity sources. Because of the nature of these projects, their loan repayment profile demands a longer tenor. In a practical sense, once lenders start disbursing funds to a PPP, the loans could remain on their balance sheet for around 20 years. This is a typical scenario.

For such prolonged engagement in PPP projects, lenders’ ability to monitor the project during the construction and operation phase becomes critical. The approach to monitoring we’ve been offered so far serves its purpose up to a point, but promising developments in real-time data monitoring have the potential to serve as effective early warning signals—assuring the success of a PPP in ways that could revolutionize certain sectors.

3 reasons why ‘Housing for All’ can happen by 2030

Gloria M. Grandolini's picture


By 2030, almost 60 percent of 8.3 billion people will live in cities, according to UN estimates.

Almost 1400 of the world’s cities will have half a million or more inhabitants.

Cities can connect people with opportunities, incubate innovation and foster growth, but they require urban planning, infrastructure, transport and housing.

'Winning the Tax Wars': Mobilizing Public Revenue, Preventing Tax Evasion

Christopher Colford's picture
"Winning The Tax Wars" conference


"When something such as the Panama Papers [disclosures on global tax avoidance] happens, we seem to be surprised. We should not be."
— Vito Tanzi, former leader of international tax policy at the International Monetary Fund; author of "Taxation in an Integrating World" (1995)

"Taxes are what we pay for civilized society," said the famed U.S. Supreme Court Justice Oliver Wendell Holmes Jr. So what does it say about society when it tolerates a skewed tax system that applauds tax avoidance, accommodates tax evasion, mocks the compliance of honest taxpayers and drags its feet on tax cooperation?

Those are some of the philosophical (and pointedly political) questions that are being debated this week at the World Bank, at a conference that has gathered some of the world's foremost authorities on international tax policy along with international advocates of fair and effective taxation.

If you can't make it in-person to the Bank's Preston Auditorium this week, many of the conference sessions are being livestreamed and the video will be archived at live.worldbank.org/winning-the-tax-wars

The livestreamed sessions include a pivotal speech by a determined tax-policy watchdog, former Sen. Carl Levin (D-Michigan) — the former chairman of the U.S. Senate's Permanent Subcommittee on Investigations — whose address on "Reducing Secrecy and Improving Tax Transparency" will be one of the highlights of the forum.

Coming just a week after a global conference in London on tax havens, tax shelters and abusive tax-dodging — a conference that highlighted some wealthy nations' lackadaisical approach to enforcing tax fairness —  this week's Bank conference, "Winning the Tax Wars: Protecting Developing Countries from Global Tax Base Erosion" will propel the fair-taxation momentum generated by the recent Panama Papers disclosures. That leaked data exposed the rampant financial engineering (by high-net-worth individuals and multinational corporations) to avoid or evade taxes.


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