Latin America in the Rearview Mirror

61 Pages Posted: 28 Dec 2004 Last revised: 1 Aug 2010

See all articles by Harold L. Cole

Harold L. Cole

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Lee E. Ohanian

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Alvaro Riascos

Universidad de los Andes, Colombia - Department of Economics

James A. Schmitz

Federal Reserve Bank of Minneapolis

Date Written: December 2004

Abstract

Latin American countries are the only Western countries that are poor and that aren't gaining ground on the United States. This paper evaluates why Latin America has not replicated Western economic success. We find that this failure is primarily due to TFP differences. Latin America's TFP gap is not plausibly accounted for by human capital differences, but rather reflects inefficient production. We argue that competitive barriers are a promising channel for understanding low Latin TFP. We document that Latin America has many more international and domestic competitive barriers than do Western and successful East Asian countries. We also document a number of microeconomic cases in Latin America in which large reductions in competitive barriers increase productivity to Western levels.

Suggested Citation

Cole, Harold L. and Ohanian, Lee E. and Riascos, Alvaro and Schmitz, James A., Latin America in the Rearview Mirror (December 2004). NBER Working Paper No. w11008. Available at SSRN: https://ssrn.com/abstract=641062

Harold L. Cole (Contact Author)

University of Pennsylvania - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Lee E. Ohanian

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
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Los Angeles, CA 90095-1477
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Alvaro Riascos

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

James A. Schmitz

Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

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