New Economics Papers
on Central and South America
Issue of 2010‒02‒27
three papers chosen by

  1. Quantifying the Impact of Financial Development on Economic Development By Jeremy Greenwood; Juan M. Sanchez; Cheng Wang
  2. Innovation, Productivity and Economic Development in Latin America and the Caribbean By Christian Daude
  3. The economics of growth. By Aghion, P.; Howitt, P.

  1. By: Jeremy Greenwood (University of Pennsylvania); Juan M. Sanchez (Federal Reserve Bank of Richmond); Cheng Wang (Iowa State University and Fudan University)
    Abstract: How important is financial development for economic development? A costly-state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as intermediation spreads and the firm-size distribution for the years 1974 and 2000. The calibrated model is then used to study cross-country data, using international data on interest-rate spreads. The analysis suggests a country like Uganda could increase its output by 140 to 180% if it could adopt the world's best practice in the financial sector. Still, this amounts to only 34 to 40% of the gap between Uganda's potential and actual output.
    Keywords: costly-state verification, economic development, financial intermediation, firm-size distribution, interest-rate spreads, cross-country output differences, cross-country TFP differences
    JEL: E13 O11 O16
    Date: 2010–02
  2. By: Christian Daude
    Abstract: GDP per capita in Latin America has been falling behind high-income countries and other benchmarks for decades and the region’s mediocre growth performance is one of the main reasons why poverty reduction, and living standards more generally, in the region is well below that observed in peer countries. In this paper, we explore some of the potential roots of this poor performance by using development accounting techniques. The results point towards total factor productivity as the main culprit for the region’s lack of convergence. In order to investigate what causes the lack of productivity catch-up, we analyse the determinants of technology diffusion, in particular of internet and mobile phone technologies. The empirical results show that institutions, absorption capacity (human capital), and financial constraints are the main explanatory variables of the diffusion gaps in these technologies between the OECD and Latin America. We also explore the performance of the region in terms of health outcomes, reflected in the evolution of life expectancy, and the specific role played by technological innovation and adoption. Finally, a calibration exercise of an endogenous growth model allows us to assess the extent to which the region’s per capita income gap is due to problems in factor accumulation or distortions that reduce the incentives to innovate; the results point to very different situations across countries in the region. While for some countries we find evidence of ‚innovation shortfalls?, other countries’ problems concentrate around low factor accumulation.<BR>En Amérique latine, le PIB par habitant n’a eu de cesse depuis plusieurs décennies de reculer par rapport à celui des pays à hauts revenus et d’autres pays de références. Les mauvaises performances de la région en terme de croissance sont l’une des principales raisons pour lesquelles la réduction de la pauvreté, et de façon générale le niveau de vie, sont bien plus faibles que ceux observés dans les pays. Dans cet article, nous explorons certaines des raisons potentielles de cette mauvaise performance à l’aide de techniques comptables de développement. Les résultats tendent à montrer que la principale cause de l’absence de convergence de la région est la productivité totale des facteurs. Afin de rechercher pourquoi ces pays n’ont pas comblé leur retard de productivité, nous analysons les déterminants des technologies de diffusion, et en particulier internet et les technologies de téléphonie mobile. Les résultats empiriques montrent que les institutions, la capacité d’absorption (capital humain) et les contraintes financières sont les principales variables explicatives de l’écart qui existe entre les pays de l’OCDE et ceux de l’Amérique latine concernant la diffusion de ces technologies. Nous explorons également la performance de la région en matière de santé, mesurée par l’évolution de l’espérance de vie, et le rôle spécifique joué par l’innovation et l’adoption technologique. Finalement, un exercice de calibrage d’un modèle de croissance endogène nous permet d’évaluer jusqu’à quel point la différence de revenu par tête au sein de la région est due à des problèmes d’allocation des facteurs ou à des distorsions qui diminuent les incitations à innover. Les résultats varient fortement d’un pays à l’autre au sein de la région. Si pour certains pays nous mettons en évidence un « manque d’innovation », pour d’autres, la faible accumulation de facteurs demeure le principal problème.
    Keywords: economic growth, innovation, Latin America, total factor productivity, croissance économique, innovation, Amérique latine, productivité totale des facteurs
    JEL: O10 O30 O47
    Date: 2010–02
  3. By: Aghion, P.; Howitt, P.
    Abstract: This comprehensive introduction to economic growth presents the main facts and puzzles about growth, proposes simple methods and models needed to explain these facts, acquaints the reader with the most recent theoretical and empirical developments, and provides tools with which to analyze policy design. The treatment of growth theory is fully accessible to students with a background no more advanced than elementary calculus and probability theory; the reader need not master all the subtleties of dynamic programming and stochastic processes to learn what is essential about such issues as cross-country convergence, the effects of financial development on growth, and the consequences of globalization. The book, which grew out of courses taught by the authors at Harvard and Brown universities, can be used both by advanced undergraduate and graduate students, and as a reference for professional economists in government or international financial organizations.
    Date: 2009–01

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