Place, Productivity, and Prosperity

Page 250

revenues to keep its economic growth from declining. Further, if fiscal competition displaces activities and resources from their most productive uses to less productive ones, these will be negative-sum efforts. Subnational jurisdictions are likely to reduce their ability to finance local public goods and services, while not increasing their tax base. A classic case of such fiscal competition is in Brazil, where states have historically been active in promoting economic development. One of the most controversial cases of unfettered fiscal wars among states is the Ford Motors plant in Bahia, originally planned to be built in Rio Grande do Sul. The package of incentives offered by Rio Grande do Sul included a R$210 million Brazilian reais ($R) (about US$200 million) loan from the state to Ford at extremely favorable conditions (6 ­percent interest, 15-year repayment period), additional state expenditures of R$234 million on infrastructure and public works, an additional assured loan from the national economic development agency (BNDES) of R$500 million, and exemption from local taxes for 10 years. In 1997, the state government tried to renegotiate the deal, claiming that the conditions were too generous for Ford and too expensive for the state. When Ford did not accept the new conditions proposed by the state, it moved to Bahia, which offered a package similar to the original one (Alves 2001). In the end, traditional subsidies used to attract (usually foreign) investors to regions lagging or suffering from trade adjustment have largely been ineffective, both because the level of necessary subsidy would be prohibitive and because of the beggar-thy-neighbor competition with competing regions. Given all the factors at work in local economic development and their interactions, analysis of LED initiatives can prove difficult. Box 8.5 describes how a World Bank– financed project in Mozambique incorporated several features of the Duranton and Venables (2018, 2020) appraisal framework.

BOX 8.5 Applying the Duranton-Venables Framework to Design a Project to Support Businesses in Mozambique The Economic Linkages for Diversification project in Mozambique aims to strengthen the performance of micro, small, and medium enterprises by developing both upstream and consumption linkages with extractive and large firms in the lagging regions of the country—the provinces of Cabo Delgado, Nampula, and Tete—while addressing and mitigating some of the drivers of fragility and conflict. The project is a good-practice example that includes several features of the Duranton and Venables (2018, 2020) framework. (Box continues on the following page.)

212

Place, Productivity, and Prosperity


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Articles inside

Concluding Remarks

8min
pages 259-262

Annex 8B. New York’s Innovation Ecosystem to Support Start-Ups

2min
page 253

Support Businesses in Mozambique

4min
pages 250-251

8.1 Global Value Chains Are Spatially Concentrated in Mexico and Vietnam

4min
pages 248-249

Improving Fiscal Incentives

2min
page 244

The Case of Hawassa Industrial Park in Ethiopia

4min
pages 245-246

Promoting the Capabilities of Entrepreneurs

3min
pages 240-241

Midsize City: Scale Up Manizales (Manizales Más) in Colombia

4min
pages 238-239

Technology in Both Lagging and Leading Regions

4min
pages 236-237

Entrepreneurial Activity Are Closely Linked

4min
pages 227-228

References

10min
pages 220-224

Notes

2min
page 219

7.2 The Average Accessibility to Jobs Is Quite Low in Many African Cities

16min
pages 207-213

Annex 7A. Using Spatial General Equilibrium Models to Quantify the Indirect Effects of Highway Corridors in Africa

4min
pages 217-218

7.3 Delivery of Subsidized Housing Has Been Declining in South Africa

4min
pages 214-215

Conclusion

2min
page 216

Interventions to Manage Urban Congestion

2min
page 206

Spatial Economic Clusters and Special Economic Zones

23min
pages 196-205

7.1 Cost-Benefit Analysis of the Direct Effects of a Transport Investment

17min
pages 189-195

the Indirect Effects Are Likely to Matter More

8min
pages 185-188

6.2 A Proposal for Spatial Public Expenditure Reviews

2min
page 171

Lessons from World Bank Evaluations of Projects to Enhance Agglomeration

6min
pages 173-175

Corridors and Long-Distance Transport Improvements

6min
pages 182-184

Dealing with Challenges in Fully Appraising Policies: Using the Framework as a Heuristic Tool

8min
pages 165-168

Conclusion

2min
page 152

6.1 A Framework for Appraising Place-Based Policies

13min
pages 159-164

in the Context of Regional Development

5min
pages 150-151

The Case of Colombia

2min
page 146

Complementarities, Silver Bullets, and Big Pushes

5min
pages 148-149

5.2 Managing the Closure of Coal Mines: Achieving a Just Transition for All

2min
page 143

Three Arguments Often Used to Support Place-Based Policies for Nonviable Regions

4min
pages 144-145

Why Is a Region Not Thriving Already?

7min
pages 138-140

Introduction

1min
page 135

References

11min
pages 130-134

Notes

2min
page 129

How Trade Costs, Infrastructure, and Institutions Affect Growth within Countries

4min
pages 113-114

4.5 Trade Volume Influences Trade Costs

3min
pages 116-117

The Role of Digital Connectivity in Narrowing Disparities between Regions

2min
page 121

to Ports in India

1min
page 112

Conclusion

2min
page 127

Globalization and Regional Growth within Countries

4min
pages 108-109

Introduction

1min
page 107

References

11min
pages 102-106

3.2 How Caste Boundaries Act as a Barrier to Migration in India

11min
pages 95-99

Introduction

1min
page 83

Shock in Brazil

4min
pages 93-94

The Barriers to Internal Migration

2min
page 92

References

12min
pages 78-82

Notes

5min
pages 76-77

Conclusion

2min
page 74

Annex 2A. Estimating Productivity, Marginal Cost, and Markups

2min
page 75

Changing Drivers of Spatial Activity: The Future Isn’t What It Used to Be

4min
pages 59-60

2.1 The Persistent Effects of Colonial Railroads on Regional Development in Kenya

2min
page 58

in Africa

4min
pages 55-56

in Asia

1min
page 53

2.8 Urban Density Is Associated with Higher Firm Entry

4min
pages 63-64

The Developing Country Urban Productivity Puzzle

2min
page 54

Measuring the Benefits of Spatial Concentration

2min
page 65

Measuring the Full Costs of Agglomeration: Accounting for the Extra Expense of Working in Developing Country Cities

2min
page 72
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