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Innovation, Productivity and Economic Development in Latin America and the Caribbean

  • Christian Daude


GDP per capita in Latin America has been falling behind high-income countries and other benchmarks for decades and the region’s mediocre growth performance is one of the main reasons why poverty reduction, and living standards more generally, in the region is well below that observed in peer countries. In this paper, we explore some of the potential roots of this poor performance by using development accounting techniques. The results point towards total factor productivity as the main culprit for the region’s lack of convergence. In order to investigate what causes the lack of productivity catch-up, we analyse the determinants of technology diffusion, in particular of internet and mobile phone technologies. The empirical results show that institutions, absorption capacity (human capital), and financial constraints are the main explanatory variables of the diffusion gaps in these technologies between the OECD and Latin America. We also explore the performance of the region in terms of health outcomes, reflected in the evolution of life expectancy, and the specific role played by technological innovation and adoption. Finally, a calibration exercise of an endogenous growth model allows us to assess the extent to which the region’s per capita income gap is due to problems in factor accumulation or distortions that reduce the incentives to innovate; the results point to very different situations across countries in the region. While for some countries we find evidence of ‚innovation shortfalls?, other countries’ problems concentrate around low factor accumulation. En Amérique latine, le PIB par habitant n’a eu de cesse depuis plusieurs décennies de reculer par rapport à celui des pays à hauts revenus et d’autres pays de références. Les mauvaises performances de la région en terme de croissance sont l’une des principales raisons pour lesquelles la réduction de la pauvreté, et de façon générale le niveau de vie, sont bien plus faibles que ceux observés dans les pays. Dans cet article, nous explorons certaines des raisons potentielles de cette mauvaise performance à l’aide de techniques comptables de développement. Les résultats tendent à montrer que la principale cause de l’absence de convergence de la région est la productivité totale des facteurs. Afin de rechercher pourquoi ces pays n’ont pas comblé leur retard de productivité, nous analysons les déterminants des technologies de diffusion, et en particulier internet et les technologies de téléphonie mobile. Les résultats empiriques montrent que les institutions, la capacité d’absorption (capital humain) et les contraintes financières sont les principales variables explicatives de l’écart qui existe entre les pays de l’OCDE et ceux de l’Amérique latine concernant la diffusion de ces technologies. Nous explorons également la performance de la région en matière de santé, mesurée par l’évolution de l’espérance de vie, et le rôle spécifique joué par l’innovation et l’adoption technologique. Finalement, un exercice de calibrage d’un modèle de croissance endogène nous permet d’évaluer jusqu’à quel point la différence de revenu par tête au sein de la région est due à des problèmes d’allocation des facteurs ou à des distorsions qui diminuent les incitations à innover. Les résultats varient fortement d’un pays à l’autre au sein de la région. Si pour certains pays nous mettons en évidence un « manque d’innovation », pour d’autres, la faible accumulation de facteurs demeure le principal problème.

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Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 288.

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Date of creation: 01 Feb 2010
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Handle: RePEc:oec:devaaa:288-en
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