Boosting Productivity and Inclusive Growth in Latin America

Produced by: 
Organisation for Economic Cooperation and Development(OECD)
Available from: 
December 2016
Paper author(s): 
OECD and the IDB, in collaboration with the Global Forum on Productivity
Globalization - Trade
Microeconomics - Competition - Productivity

In 1960, the average per capita income of the representative country in Latin America amounted to US $ 3.130 1990 international constant Geary-Khamis dollars1 . In 2010, the average per capita income of the region exceeded $6,776 US international constant dollars and, despite the economic recession that the region has since suffered, IDB estimates suggest that by end-2016 median per capita income in Latin America and the Caribbean was around US $ 8,916 Geary-Khamis constant international dollars. There is no doubt that in recent decades the region, despite its more than considerable macroeconomic volatility, has managed to substantially increase median income levels. Improving welfare not only has resulted in an increase in per capita income. Recent work at the Social Department of the Inter-American Development Bank, especially the recent monograph "Realities and Perspectives: Social Pulse of Latin America and the Caribbean 2016"2 , documents social improvements that the region has made in the last quarter century: extreme poverty has been halved (ECLAC, 2016), infant mortality fell by 65% (World Bank, 2016), life expectancy at birth increased by almost eight years, primary school attendance is almost universal, treated water supply now reaches 96% of households, and two-thirds of women of working age are active in the labor market. However, when the ability of the region to converge to per capita income levels of the most developed economies is used as a yardstick, the balance is less encouraging. Fernández-Arias (2014) documents that between 1960 and 2010, the per capita income gap between the representative country of the region and the US has increased by 8%3 . A decomposition of the increase in the relative income gap made by the same author identifies low relative growth in total factor productivity as the main cause of failed real convergence in Latin America.


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