Sources of Productivity and Economic Growth in Latin America and the Caribbean, 1990-2013

This article examines growth experiences of 23 Latin American and English-speaking Caribbean countries from 1990 to 2013. We carry out three types of exercises. The first exercise for the 23 countries in the region uses the traditional methods to measure capital, labour, and efficiency or total factor productivity (TFP). The second exercise focuses on the Latin American countries only. The labour measure (L) is improved through the introduction of a quality adjustment to hours worked, while the capital measure includes capital services. The exercises reveal that as the input measures improve, the efficiency measure (TFP), which is usually positive and statistically explains a large share of observed growth, becomes increasingly negative for all groups of countries and all sub-periods. The only exception is the boom period of 2003–2008. A third exercise uses the LA-KLEMS database to disaggregate the data into nine industries. For each industry, we identify three characteristics of the labour factor and eight types of capital assets. The disaggregated data are only available for Argentina, Brazil, Chile, Colombia, and Mexico. Based on this more disaggregated analysis, we put forward hypotheses on the factors that determine growth and discuss implications for public policies.