This week we had some interesting meetings about economic policy with provincial government and a local investment promotion agency. We all agreed that growth and job creation happens in specific places and there is a need to consider the provincial or local implications of, for example, the IPAP2. What is amazing is how little we all know about which firms are producing WHAT, HOW and WHERE. Data on sub-national economic activity is limited to official annual estimates at provincial level or the databases build by private sector consultants. Almost no-one has any reliable firm-level information. Yet policymakers want suggestions for programmes that they can implement.
This brings me to the point that Johan Fourie raised on his blog today: the typical textbook/ foreign-expert recommendations for such programmes would be to build infrastructure, encourage on-the-job training or ensure a business-friendly environment for firms to grow. Ideas like wage subsidies and arguments for a weaker Rand exchange rate and import substitution strategies are also out there. However, to develop sensible interventions will require more work by academic researchers and an opportunity to make themselves heard.
As in the case of education research, there are a number of people who are doing excellent work. At firm-level Neil Rankin and his AMERU team at Wits are busy with a Youth Unemployment Intervention Evaluation project. Volker Schoër has examined the importance of social networks in finding employment, but considering the scope of the challenges, they need co-workers, collaborators, support. We don’t really know what the barriers that prevent firms to export are, how important links with the suppliers of intermediate goods are, how thick local labour markets are, or how firms are innovating.
Is the micro-economist dead? I was actually thinking about this the other day. South African policy frameworks (GEAR, ASGISA, MERS, IPAP as well as the New Growth Path) underline the need for micro-economic reform, but all of them take a macro-economic perspective on these issues. The textbook advantages of investment, industrial-linkages, cross-cutting infrastructure, economies of agglomeration are repeatedly restated with exponential conviction. Focus is never given to the "WHAT, HOW and WHERES". Like Trevor Manual said, developing countries wont be able to realize developmental benefits if their policy makers aren't able to design workable plans to implement the theory.
ReplyDeleteThere is definitely a need for more pragmatic research. A call for micro-level research, however, will need to go along with a call to redefine what we call "good" research. Lets face it, we cant all be Solows, and lets face it, seminal as Solow's work is, thirty years later, his work is yet to realize real prosperity.