IDEAS home Printed from
   My bibliography  Save this article

Understanding Solow Residuals in Latin America


  • Christian Daude



This paper presents a series of development accounting exercises for Latin America using novel databases and methods to investigate the robustness and policy implications of its results. While the residual – often interpreted as total factor productivity or aggregate efficiency –appears to be the most important driver of output per worker gaps in Latin America and the Caribbean using the traditional development accounting approach, this result depends on the functional forms, adjustments for the quality of human capital and alternative benchmarks. Two factors are important, in the sense that, if explicitly modeled, the fraction of Latin American output per worker differentials with respect to the US explained by the remaining residual falls from 52 to, respectively, 42 and 34 percentage points: first, differences in the quality of education, empirically modeled here as a function of standardized test scores; second, differences in the relevant production possibilities frontier. The paper also highlights the heterogeneity among countries in the region and discusses alternative ways to link macroeconomic benchmarking exercises to policies.

Suggested Citation

  • Christian Daude, 2013. "Understanding Solow Residuals in Latin America," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Spring 20), pages 109-144, January.
  • Handle: RePEc:col:000425:010913

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Mendez-Guerra, Carlos, 2014. "On the Development Gap between Latin America and East Asia: Welfare, Efficiency, and Misallocation," MPRA Paper 62588, University Library of Munich, Germany.

    More about this item


    economic growth; developing accounting; total factor productivity; Latin America;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000425:010913. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LACEA). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.