Openness, R&D, and Growth: Difference in Latin American and East Asian Policy and Political Economy

Abstract

This paper reviews recent theoretical and empirical literature relating openness, research and development (R&D) policies, and growth in developing countries. Although there are indications that openness is associated with improvements in productivity due to technological spillovers, active R&D policies and complementary institutions (intellectual property rights) play an important role in bringing about such gains. The article compares East Asia and Latin America, with special attention to the latter. The puzzle is that both regions opened their economies and carried out a set of similar industrial and technological strategies, yet their experiences in growth and R&D performance are divergent. After considering differences in each region’s pace of integration into the world economy, the analysis moves to a closer look at the political economy of policy formation in Latin America and East Asia. The paper is divided into four sections. The first section introduces the debate; the second encompasses a comprehensive theoretical and empirical literature review; the third discusses the policy and political economy experiences of the regions. Finally, the conclusion offers policy recommendations for Latin America, based on the success of the East Asian experience.1