Microeconomic Interventions after the Washington Consensus

Posted: 25 Apr 2011

See all articles by Andrés Rodríguez-Clare

Andrés Rodríguez-Clare

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 2005

Abstract

This paper examines the microeconomic interventions used to complement Washington Consensus reforms in Latin America. It maintains that the kind of interventions currently in vogue in most countries lack a sound theoretical and empirical foundation or are applied in a manner likely to prove ineffective. Arguing that the countries of the region should engage in selective interventions aimed at discovering new profitable activities (horizontal policies) and at creating innovation clusters (vertical policies), the paper discusses how such a strategy could be implemented. Both horizontal and vertical policies are important, although the appropriate mix depends on a country’s stage of development. Pessimism about Latin American economies’ ability to undertake this more sophisticated set of microeconomic interventions is an exaggerated reaction to the problems of corruption and capture encountered by import-substitution policies. At least in some countries, there is scope for a carefully executed strategy of the type discussed here.

Suggested Citation

Rodríguez-Clare, Andrés, Microeconomic Interventions after the Washington Consensus (February 2005). IDB Working Paper No. 435, Available at SSRN: https://ssrn.com/abstract=1818724

Andrés Rodríguez-Clare (Contact Author)

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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