On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean

46 Pages Posted: 21 Apr 2011

See all articles by Christian Daude

Christian Daude

Inter-American Development Bank (IADB)

Eduardo Fernandez-Arias

Inter-American Development Bank (IDB)

Date Written: February 2010

Abstract

This paper combines development and growth accounting exercises with economic theory to estimate the relative importance of total factor productivity and the accumulation of factors of production in the economic development performance of Latin America. The region’s development performance is assessed by contrast with various alternative benchmarks, both advanced countries and peer countries in other regions. The paper finds that total factor productivity is the predominant factor: low productivity and slow productivity growth, as opposed to impediments to factor accumulation, are the key to understanding Latin America’s low income relative to developed economies and its stagnation relative to other developing countries. While policies easing factor accumulation would help somewhat in improving productivity, for the most part, closing the productivity gap requires productivity-specific policies.

Suggested Citation

Daude, Christian and Fernandez-Arias, Eduardo, On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean (February 2010). IDB Working Paper No. 41, Available at SSRN: https://ssrn.com/abstract=1817273 or http://dx.doi.org/10.2139/ssrn.1817273

Christian Daude

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Eduardo Fernandez-Arias

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue, NW
Research Department
Washington, DC 20577
United States
202-623-3783 (Phone)
202-623-2481 (Fax)

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