The Incentives and Comparative Advantage (INCA) Unit was constituted as a World Bank applied research project (RPO 672-44 "Establishment of an Experimental Unit for Work on Industrial Incentives and Comparative Advantages") and was approved by the Bank's Research Committee in August 1981. INCA began operations in September 1981 as a two-year experimental central support unit primarily funded by the Industrial Development Finance Department (IDF) and the Bank's Research Committee with contributions from theProductivity Division of the Development Research Department (DRDPR) and each of the regional operating departments. These sponsors considered the unit as an experiment in the integration of research into the Bank's operations, funded by the research budget.

Since the early 1970s, the Bank had been financing research projects (RPOs) involving the detailed analysis of protection and other incentives and empirical estimation of incentive and comparative advantage indicators. Bank staff involved in the research projects had also been providing advice and assistance to operational staff responsible for INCA-type studies for a considerable time. However, this support was informal, ad hoc, and uncoordinated. Member countries and the Bank's regional operating units increasingly regarded these studies as pertinent for policy reform and there was a demand for new studies, mainly in the context of structured adjustment lending (SALs) or industrial sector loans, as well as a demand for technical assistance for protection and other aspects of industrial policy. The INCA Unit was therefore created with the following objectives:

• undertake applied research, including on the development of operational tools;

• support policy related studies;

• provide technical assistance and support to operating units of the Bank (notably the regional industrial development and finance operating units and program units);

• work with research or other organizations in member countries to build local capabilities to undertake INCA analysis on a permanent basis, in assistance with the Regions.

Economist Garry Pursell was appointed to lead the INCA Unit in August 1981 which consisted of a small staff of research assistants and full-time consultants. The INCA Unit was originally situated within IDF until October 1982 when IDF was absorbed by the newly established Industry Department (IND). The unit was subsequently incorporated into the department's Strategy and Policy Division (INDSP) and reported to the INDSP division chief. Theapplied research efforts of the unit resulted in multiple products for supporting empirical INCA studies including the development of computer software and programs for data processing, a manual on INCA studies for country officials and researchers, methodological work, INCA consultant rosters, information files (including sources of information for international price data) and bibliographies of INCA and INDSP effective protection studies.

Funding for the unit was extended to December 1984 and by then, the unit had completed most of its work as outlined in a Project Completion Report (PCR) submitted in March 1985. INDSP began to support INCA functions in January 1985 and created a working group that met weekly; however, it was gradually phased out a short time later. The Industry Department and INDSP were terminated with most organizational units in the 1987 Bank-wide reorganization. The INCA analysis and support function would not be expanded or established on a permanent basis but would still be carried under the Industry Development Division, Industry and Energy Department (IENIN) under the Policy, Planning and Research Vice Presidency (PRE).