Productivity Differences Between and Within Countries

Abstract

We document substantial within-country (cross-municipality) differences in incomes for a large number of countries in the Americas. A significant fraction of the within-country differences cannot be explained by observed human capital. We conjecture that the sources of within-country and between-country differences are related. As a first step towards a unified framework, we propose a simple model incorporating both differences in technological know-how across countries and differences in productive efficiency within countries.

Keywords: economic development, economic growth, institutions, Latin America, productivity differences, regional inequality, within-country differences

JEL Classification: O18, O40, R11