Publication: Understanding Latin America and the Caribbean’s Income Gap
Loading...
Date
2015-07
ISSN
Published
2015-07
Author(s)
Abstract
Even nearly ten years of solid growth cannot guarantee long-term income convergence. The countries of the Latin America and Caribbean region (LAC), like other emerging economies, have benefited from a decade of remarkable growth and some income per capita convergence towards the United States and other industrialized countries. Yet, despite this recent progress, LAC still faces a significant per capita income gap with the developed world. The studies in this volume contribute to the ongoing debate on the reasons for this persistent income gap and the potential drivers of convergence, and propose some broad avenues for reform.
Link to Data Set
Citation
“Thompson Araujo, Jorge; Vostroknutova, Ekaterina; Wacker, Konstantin M.; Clavijo, Mateo. Thompson Araujo, Jorge; Vostroknutova, Ekaterina; Wacker, Konstantin M.; Clavijo, Mateo, editors. 2015. Understanding Latin America and the Caribbean’s Income Gap. © World Bank. http://hdl.handle.net/10986/22485 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Benchmarking the Determinants of Economic Growth in Latin America and the Caribbean(World Bank, Washington, DC, 2014-12)The Latin America and Caribbean (LAC) region has seen a decade of remarkable growth and income convergence. Growth has been a key driver for reducing poverty and boosting shared prosperity. It has been debated how much of this decade of growth has been driven by policy reforms and how much was due to the favorable external conditions. While external factors were supportive and relevant, the effect of domestic policies was just as relevant for explaining LAC's recent growth performance. The emphasis of domestic policy has shifted from stabilization policies to structural policies. In addition, a benchmarking exercise reveals which policy gaps will lead to the highest potential growth-payoffs for each country and helps identify potential trade-offs. The authors analyze growth in LAC using descriptive statistics and growth econometrics. The authors use these results for explaining the pattern of growth in LAC over the last decade, for looking ahead, and to identify potential policy gaps.Publication Beyond Commodities(World Bank, Washington, DC, 2014-12-01)The Latin America and Caribbean (LAC) region has seen a decade of remarkable growth and income convergence. Growth has been a key driver for reducing poverty and boosting shared prosperity. It has been debated how much of this decade of growth has been driven by policy reforms and how much was due to the favorable external conditions. While external factors were supportive and relevant, the effect of domestic policies was just as relevant for explaining LAC's recent growth performance. The emphasis of domestic policy has shifted from stabilization policies to structural policies. In addition, a benchmarking exercise reveals which policy gaps will lead to the highest potential growth-payoffs for each country and helps identify potential trade-offs. The authors analyze growth in LAC using descriptive statistics and growth econometrics. The authors use these results for explaining the pattern of growth in LAC over the last decade, for looking ahead, and to identify potential policy gaps.Publication Understanding the Income and Efficiency Gap in Latin America and the Caribbean(Washington, DC: World Bank, 2016-03-23)The countries of the Latin America and Caribbean region (LAC), like other emerging economies, have benefited from a decade of remarkable growth and some income per capita convergence towards the United States and other industrialized countries. However, even nearly ten years of solid growth in the first decade of the 21st century could not guarantee that LAC would move on to a sustained long-term income convergence path. In fact, despite this recent progress, LAC still faces a significant per capita income gap with the developed world. The papers in this volume contribute to the ongoing debate on the reasons for this persistent income gap and the potential drivers of convergence, and propose some broad avenues for reform. This volume presents new macro-, sectoral-, and micro-level evidence that: (i) differences in total factor productivity (TFP), or efficiency in using the production factors, such as physical and human capital, explain a large part of LAC's persistent income gap; and (ii) resource misallocation is the main factor behind LAC's large efficiency gap. At the same time, the findings of this volume indicate there is significant room for further economic growth gains from technology adoption and innovation more broadly. In fact, the quality of the available technology in LAC is low, and there is very little innovation. Although firms can use innovation to reach productivity at the global productivity frontier, weak institutions reduce incentives to innovate. This volume also proposes that the main priorities for improving resource allocation and the incentives to innovate include: (i) enhancing market competition in key network industries (transport, financial, telecommunications, logistics, communication and distribution services); (ii) increasing labor market flexibility (including skill-mismatches and social barriers); (iii) removing informational frictions (including complex tax regimes and credit rationing); (iv) strengthening property rights; and (v) improving the rule of law.Publication Beyond Commodities(Washington, DC: World Bank, 2016-11-02)Beyond Commodities shows that Latin America and the Caribbean’s growth performance over the last decade cannot be reduced to the commodity boom: growth-promoting reforms that strengthened financial development, increased trade openness and improved infrastructure development also played a significant role and can continue doing so. Based on the econometric analysis of panel data from the 1970-2010 period for 126 countries, the study shows that, while the commodity boom facilitated growth in most of the region, it did not determine it. Domestic pro-growth policies and the maintenance of a sound macro-fiscal framework played a central role in explaining the region’s good performance during last decade. It also shows that new growth “stars” such as Panama, Peru, Colombia and the Dominican Republic emerged during this period. In addition, a benchmarking exercise reveals which policy gaps will lead to the highest potential growth-payoffs for each country and helps identify potential trade-offs. Finally, with the worsening of external conditions, the authors conclude that the countries of Latin America and the Caribbean have no choice but to turn their attention to domestic drivers to keep growth going, as the structural reforms agenda remains unfinished.Publication Productivity Growth in Latin American and the Caribbean(Washington, DC: World Bank, 2017-11-01)This paper brings together the main findings and policy implications of two recent World Bank regional reports on economic growth in Latin America and the Caribbean: Araujo, Vostroknutova, Wacker and Clavijo, eds. (2016) and Araujo, Vostroknutova, Brueckner, Clavijo, and Wacker (2016). In doing so, the paper focuses on finding the right balance between micro- and macro-inference when thinking about growth in Latin America and the Caribbean. The paper documents the region's growth performance over the past decade, highlighting the roles played by the commodity boom, macroeconomic stabilization and structural reforms. It notes that, despite faster growth during the first decade of this century, the region failed to achieve sustained convergence towards higher income levels. The paper points out that the persistent income gap could be reduced through: (i) increasing focus on closing the efficiency gap – beyond mere factor accumulation; (ii) eliminating distortions that cause misallocation of resources will also improve the incentives to innovate; (iii) identifying the main country-specific constraints to growth instead of looking for universal recipes; (iv) containing macroeconomic volatility, thereby alleviating the negative impact of persistent poverty on growth; and (v) improving the composition of public spending.
Users also downloaded
Showing related downloaded files
Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication Morocco Economic Update, Winter 2025(Washington, DC: World Bank, 2025-04-03)Despite the drought causing a modest deceleration of overall GDP growth to 3.2 percent, the Moroccan economy has exhibited some encouraging trends in 2024. Non-agricultural growth has accelerated to an estimated 3.8 percent, driven by a revitalized industrial sector and a rebound in gross capital formation. Inflation has dropped below 1 percent, allowing Bank al-Maghrib to begin easing its monetary policy. While rural labor markets remain depressed, the economy has added close to 162,000 jobs in urban areas. Morocco’s external position remains strong overall, with a moderate current account deficit largely financed by growing foreign direct investment inflows, underpinned by solid investor confidence indicators. Despite significant spending pressures, the debt-to-GDP ratio is slowly declining.Publication Europe and Central Asia Economic Update, Spring 2025: Accelerating Growth through Entrepreneurship, Technology Adoption, and Innovation(Washington, DC: World Bank, 2025-04-23)Business dynamism and economic growth in Europe and Central Asia have weakened since the late 2000s, with productivity growth driven largely by resource reallocation between firms and sectors rather than innovation. To move up the value chain, countries need to facilitate technology adoption, stronger domestic competition, and firm-level innovation to build a more dynamic private sector. Governments should move beyond broad support for small- and medium-sized enterprises and focus on enabling the most productive firms to expand and compete globally. Strengthening competition policies, reducing the presence of state-owned enterprises, and ensuring fair market access are crucial. Limited availability of long-term financing and risk capital hinders firm growth and innovation. Economic disruptions are a shock in the short term, but they provide an opportunity for implementing enterprise and structural reforms, all of which are essential for creating better-paying jobs and helping countries in the region to achieve high-income status.