The Productivity Gap in Latin America: Lessons from 50 Years of Development

48 Pages Posted: 25 Apr 2017

See all articles by Eduardo Fernández-Arias

Eduardo Fernández-Arias

Inter-American Development Bank (IDB)

Sergio Rodríguez-Apolinar

International Monetary Fund (IMF)

Date Written: May 2016

Abstract

This paper combines development accounting exercises with economic theory to assess the importance of total factor productivity and the accumulation of factors of production as engines of growth in Latin America. Using the new, drastically revised Penn World Table (PWT) and Barro-Lee datasets, the paper shows that lower and non-convergent income relative to successful development benchmarks are explained by subpar productivity gains rather than slower factor accumulation. The empirical analysis of the interplay between productivity and accumulation in the process of development suggests that one explanation for this pattern is that investment in Latin America is not as productivity-enhancing as in less distorted economies.

Keywords: Economic growth, Total factor productivity, Development, Productive development policies

JEL Classification: O11, O47

Suggested Citation

Fernández-Arias, Eduardo and Rodríguez-Apolinar, Sergio, The Productivity Gap in Latin America: Lessons from 50 Years of Development (May 2016). IDB Working Paper No. IDB-WP-692. Available at SSRN: https://ssrn.com/abstract=2956692 or http://dx.doi.org/10.2139/ssrn.2956692

Eduardo Fernández-Arias (Contact Author)

Inter-American Development Bank (IDB)

1300 New York Avenue NW
Washington, DC 20577
United States

Sergio Rodríguez-Apolinar

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

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