Closing the Gap in Education and Technology

The report

   Download the report(PDF) Order the report here Related links Press realeaseA Annual World Bank Conference on Development in Latin America and the Caribbeannn

In Closing the Gap in Education and Technology, principal authors David de Ferranti and Guillermo E. Perry advise Latin American and Caribbean governments to address the region's deficits in skills and technology, and thereby boost productivity, which is essential to improving growth prospects.

Between 1950 and 2000, per capita annual income in LAC doubled from $3,000 to $6,200. But in the OECD countries, per capita annual income tripled during the same period, from $7,300 to $23,000. During the same time period, the ratio of LAC's average income to the developed-country average fell from more than 40 percent in 1950 to about 25 percent in 2000

The report attributes this lag in Latin America's income growth to a "productivity gap" which, in turn, is caused by the region's failure to keep pace with adoption of new technologies in its production processes and slow skill upgrading.

To close this "productivity gap" in LAC, the report calls for a range of policy approaches and strategies, depending on a country's level of development.
The Bank study identifies three progressive stages in a country's technological evolution — adoption, adaptation, and creation — and observes that policies should be designed to address the particular challenges that accompany each stage.

Countries at the "adoption stage", for example, where there are low levels of skilled labor and market competition, and few innovation-related institutions such as universities and research centers, the report recommends a focus on primary and secondary education coupled with an open trade policy. Countries that would benefit from such policies include Haiti, Guyana, Paraguay, Bolivia, Guatemala, Honduras, Ecuador and Nicaragua.

Countries at the "adaptation stage", such as Brazil, Colombia, Costa Rica, Peru, El Salvador, Panama and Venezuela, have more specialized skills needs. They are advised to meet these needs by providing incentives to private providers of advanced education, while sustaining state investment in primary and secondary schooling. They should also promote foreign direct investment, strengthen their information and communications technology sector, implement credible patent protection policies, establish competitive funding for private R&D and better links between universities, think tanks and firms.

Countries at the "creation stage" have been adapting technologies and selling resulting products at lower cost than their competitors, but which face challenges from new low-wage market entrants, need to make a leap forward into creating new products and processes. In LAC, countries moving in this direction are Chile, Mexico and, to some extent, Uruguay and Argentina. These countries, the report advises, need to continue expansion of higher education, sustain openness to trade and foreign direct investment, strengthen incentives for private-sector research and development and better integrate their National Innovation Systems.

In conclusion, the report argues that many LAC countries have been improving education and social risk management systems so that they are now ready to reap the rewards associated with forging stronger trade and technology ties with countries that are closer to world technology frontiers.