On%20the%20Role%20of%20Productivity%20and%20Factor%20Accumulation%20in%20Economic%20Development%20in%20Latin%20America%20and%20the%20Caribbean%3A%202017%20Update

Technical Notes

On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean: 2017 Update


CODE: IDB-TN-1329
AUTHOR(s): Fernández-Arias, Eduardo
PUBLISHED: October 2017
LANGUAGE: English
RELATED TOPICS: Macroeconomics
DOWNLOAD FILE IN: English

Abstract:

This report 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 region’s 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 insufficient productivity growth, as opposed to impediments to factor accumulation, are the key to understanding Latin America’s 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.

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