The relative importance of total factor productivity and factors of production in income per worker: Evidence from the Brazilian states

Income per worker gap in different regions of Brazil is stunning. To assess the relative importance of factor of production and total factor productivity (TFP) in those income per worker disparities, development accounting exercises were carried out for the 1970, 1980, 1990, 2000 and 2010 years. In 1970, both types of capital stocks and TPF gaps were associated with the Brazilian states lower relative income in comparison to São Paulo state. Over the decades up to the year 2000, the Brazilian states have experienced a relevant capital deepening process, which account for income per work catching-up. However, the TFP gaps in relation to the reference state remain almost stable and their reduction is fundamental to the maintenance of the Brazilians states income per worker catching-up process. The conclusions remain similar when the analysis is conducted by means of distinct proxies of physical capital. When considering the human capital qualitative aspect, we noticed a greater human capital gap among the Brazilian states in relation to São Paulo State and, as a consequence, a reduction in the TFP relative gap