EconPapers    
Economics at your fingertips  
 

The Latin American Development Problem: An Interpretation

Diego Restuccia ()

Working Papers from University of Toronto, Department of Economics

Abstract: By international standards, gross domestic product (GDP) per capita in Latin America is low: around one fourth of that of the United States. Moreover, in the last five decades, Latin America has failed to catch-up in wealth to the level of the United States while other countries at similar or even lower stages of development have been successful. The failure to attain higher levels of relative income represents what I call the development problem in Latin America. Using a development accounting framework, I find that the bulk of the difference in GDP per capita between Latin America and the United States is accounted for by low GDP per hour and, in particular, low total factor productivity (TFP) in Latin America. I estimate that to explain the difference in GDP per hour, TFP in Latin America must be around 60 percent of that in the United States. I then consider a model with heterogeneous production units where institutions and policy distortions lead to a 60 percent productivity ratio between Latin America and the United States. Removing the barriers to productivity can increase long-run GDP per hour in Latin America by a factor of 4 relative to that of the United States. This increase is equivalent to 70-years worth of post-world-war-II economic development in the United States.

Keywords: productivity; capital; schooling; establishments; distortions (search for similar items in EconPapers)
JEL-codes: O1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-eff, nep-his and nep-lam
Date: 2012-10-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://www.economics.utoronto.ca/public/workingPapers/tecipa-466.pdf Main Text (application/pdf)

Related works:
Journal Article: The Latin American Development Problem: An Interpretation (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-466

Access Statistics for this paper

More papers in Working Papers from University of Toronto, Department of Economics 150 St. George Street, Toronto, Ontario.
Bibliographic data for series maintained by RePEc Maintainer ().

 
Page updated 2019-09-18
Handle: RePEc:tor:tecipa:tecipa-466