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On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean

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  • Christian Daude
  • Eduardo Fernández-Arias

Abstract

This paper combines development and growth accounting exercises with economic theory to estimate the relative importance of total factor productivity and the accumulation of factors of production in the economic development performance of Latin America. The regions development performance is assessed by contrast with various alternative benchmarks, both advanced countries and peer countries in other regions. The paper finds that total factor productivity is the predominant factor: low productivity and slow productivity growth, as opposed to impediments to factor accumulation, are the key to understanding Latin Americas low income relative to developed economies and its stagnation relative to other developing countries. While policies easing factor accumulation would help somewhat in improving productivity, for the most part, closing the productivity gap requires productivity-specific policies.

Suggested Citation

  • Christian Daude & Eduardo Fernández-Arias, 2010. "On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean," IDB Publications (Working Papers) 1696, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:1696
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    File URL: http://publications.iadb.org/bitstream/handle/11319/1696/On%20the%20Role%20of%20Productivity%20and%20Factor%20Accumulation%20in%20Economic%20Development%20in%20Latin%20America%20and%20the%20Caribbean.pdf?sequence=1
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    Cited by:

    1. Busso Matias & Madrigal Lucia & Pagés Carmen, 2013. "Productivity and resource misallocation in Latin America," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 1-30, June.
    2. Carolina Arteaga Cabrales, 2011. "Human Capital Externalities and Growth," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 29(66), pages 12-47, December.
    3. Eduardo Fernández-Arias & Sergio Rodríguez-Apolinar, 2016. "The Productivity Gap in Latin America: Lessons from 50 Years of Development," IDB Publications (Working Papers) 94097, Inter-American Development Bank.
    4. Matías Busso & Maria Victoria Fazio & Santiago Levy Algazi, 2012. "(In)Formal and (Un)Productive: The Productivity Costs of Excessive Informality in Mexico," IDB Publications (Working Papers) 4047, Inter-American Development Bank.
    5. Eduardo Lora, 2013. "The Distance between Perception and Reality in the Social Domains of Life," IDB Publications (Working Papers) 4608, Inter-American Development Bank.
    6. Úbeda, Ricardo & Alsua, Carlos & Carrasco, Nelson, 2015. "Purchasing models and organizational performance: a study of key strategic tools," Journal of Business Research, Elsevier, vol. 68(2), pages 177-188.
    7. Jorge Thompson Araujo & Markus Brueckner & Mateo Clavijo & Ekaterina Vostroknutova & Konstantin M. Wacker, 2014. "Benchmarking the Determinants of Economic Growth in Latin America and the Caribbean," World Bank Other Operational Studies 21318, The World Bank.
    8. Christian Daude, 2012. "Development Accounting: Lessons for Latin America," OECD Development Centre Working Papers 313, OECD Publishing.
    9. Sebastián J. Miller & Sebastián Galiani & Omar O. Chisari, 2013. "Optimal Adaptation and Mitigation to Climate Change in Small Environmental Economies," IDB Publications (Working Papers) 4668, Inter-American Development Bank.
    10. Jorge Thompson Araujo & Ekaterina Vostroknutova & Markus Brueckner & Mateo Clavijo & Konstantin M. Wacker, 2016. "Beyond Commodities," World Bank Publications, The World Bank, number 25321, October.
    11. Riana Razafimandimby Andrianjaka & Eric Rougier, 2017. "What difference does it make? Revue de littérature et analyse empirique des déterminants de la Trappe à Revenu Intermédiaire," Cahiers du GREThA 2017-16, Groupe de Recherche en Economie Théorique et Appliquée.

    More about this item

    Keywords

    Productivity; Industrial Policy; Economic Development & Growth; IDB-WP-155;

    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

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