Firms' Productivity and Resource Misallocation in Latin America

This presentation aims to understand what is behind aggregate productivity and how it grows, expanding the scope beyond that of traditional studies -which tend to emphasize technological growth and manufacturing- to include total factor productivity (TFP) to reflect market inefficiencies. The authors show that improving the efficiency of markets is another route towards higher productivity and income growth, and that there is a need to look at what is happening at all sectors of the economy, not only manufacturing; and at all firms, not only larger ones. The data assembled (from Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, El Salvador, Mexico, Uruguay and Venezuela) zeroes in on high transportation costs, shallow credit markets, high taxes and high rates of evasion as primary barriers to productivity growth.