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 region’s development performance is assessed in contrast with
various alternative benchmarks, both advanced countries and peer countries in other
regions. We find that total factor productivity is the predominant factor: low and slow
productivity, as opposed to impediments to factor accumulation, is the key to
understand Latin America’s low income relative to developed economies and its
stagnation relative to other developing countries that are catching up. While policies
easing factor accumulation would help improving productivity somewhat, for the most
part, closing the productivity gap requires productivity-specific policies.
