Entrevista a exportadores

In growth accounting, total factor productivity (TFP) is the residual that captures the share of GDP growth that cannot be explained by the observable factors of production: physical capital stock, human capital stock, and labor. It is at best a broad, first-order measure of productivity, but nevertheless is widely used in empirical studies and serves as a proxy for the efficiency with which the inputs are combined to produce output.

Table 2.1.1 reports growth accounting for aggregate GDP in economies of different income class. TFP is calculated in PWT 9.0 using labor hours, not number of employees, as the measure of labor

2.1.5c Infrastructure indicators by income group

1

Low Income Middle Income2 High Income3

Electricity generating capacity, gigawatts/thousand workers

8 6 4 2 0 0.33 0.66 1.24 2.53 3.93 5.22 0.02 0.060.13 1

Low Income Middle Income2 High Income3

Paved road in km/thousand workers

0 10 20 30 40 50 0.35 0.62 1.05 1.49 3.225.33 12.66 21.30 29.74 1

Low Income Middle Income2 High Income3

Railway in km/thousand workers

1 0 2 3 4 5 0.13 0.27 0.54 0.21 0.54 1.18 0.56 1.09 2.34 km = kilometer

Note: Number above the blue line is the median, while numbers above and below the median are the 75th and 25th percentiles, respectively.

input.5 _{Economies are categorized based on per capita income at the} beginning of each decade and if they moved to another category over the remainder of that decade. Of special interest are middle-income economies that remained middle income and those that graduated to high-income status. However, the results for other economies—those that remain low income and those that move from low to middle income—are also reported for reference (Tables 2.1.1a, 2.1.1b, and 2.1.1c).6

Growth accounting can be useful in that it provides clues on whether some components of GDP growth are more important than others in enabling economies to move up the income ladder. The figures reveal that middle-income economies able to transition to high income experience positive TFP growth in every decade (Table 2.1.1e). Human capital input also rises quite strongly in these economies, probably reflecting relatively heavy investment in education. Physical capital stock likewise tends to grow rapidly in successful middle-income economies.

Some interesting patterns emerge when comparing the results for middle-income economies that successfully rise to high income with results for those unable to do so (Table 2.1.1d). Physical capital and human capital play a similar role in the growth of both groups, but labor plays a visibly smaller role in the growth of graduating economies. More importantly, TFP growth appears visibly slower in economies that remain at middle income and accounts for a much lower share of GDP growth. More precisely, TFP contributed 1.2 percentage points (TFP share times GDP growth) to the 4.3% growth recorded for the entire sample period in economies able to transition to high income. In contrast, it contributed only 0.4 percentage points to 4.1% growth in economies unable to move out of middle income.

The decompositions suggest that economies that successfully achieve high-income status exploit multiple advantages, including relatively rapid growth in TFP and human capital, and relatively high fixed investment. The clear difference between middle-income economies that graduate to high income and those that do not is the larger TFP growth in the former, in both absolute and relative terms. It is therefore worthwhile to take a closer look at the determinants of TFP growth in the next section.

The growth accounting exercise above suggests that, although investment in physical and human capital will continue to matter as middle-income economies grow richer, productivity growth will become more important as a driver of economic growth. For middle- income economies to graduate to high income, they need to achieve rapid productivity growth. Georgiev et al. (forthcoming), for example, pointed out that emerging Europe experienced relatively rapid income convergence fueled primarily by rapid TFP growth in individual economies. Failure to achieve productivity growth, on the other hand, can doom economies to a long stay in middle income (See Box 2.1.2). In sum, productivity growth appears to be pivotal to the transition.

2.1.1 Growth accounting for aggregate GDP by income class

a. All economies

Observations Aggregate output growth (%)

% contributions to output growth

Capital Labor Human capital Total factor productivity

1960s  69 5.39 39.4 14.4  8.5  37.6 1970s  81 4.77 58.4 22.0 10.9   8.8 1980s  92 2.87 58.9 39.7 20.9 –19.5 1990s 105 2.65 61.3 33.8 18.8 –13.9 2000s 114 3.96 48.4 16.4  9.8  25.4 2010–2014 113 3.38 60.1 22.8 11.5   5.6 Total 630 3.90 51.5 22.1 11.5  14.9

b. Low-income economies that stay low income in the ensuing decade Observations Aggregate output growth (%)

% contributions to output growth

Capital Labor Human capital Total factor productivity

1960s  17 4.71 30.7 21.2  7.2  40.9 1970s  15 4.02 50.5 35.1  8.5   6.0 1980s  21 2.85 42.0 54.2 19.9 –16.1 1990s  20 2.61 46.2 62.6 22.5 –31.3 2000s  14 5.09 32.6 26.1  8.3  33.0 2010–2014  12 5.29 58.8 32.7 11.7  –3.2 Total  99 3.91 42.6 36.9 12.3   8.2

c. Low-income economies that rise to middle or high income in the ensuing decade Observations Aggregate output growth (%)

% contributions to output growth

Capital Labor Human capital Total factor productivity

1960s   6 6.60 37.3 16.7  7.3  38.8 1970s   7 6.71 53.7 23.7  9.7  13.0 1980s   5 6.23 49.4 29.4 17.2   4.0 1990s   3 5.14 50.8 27.2 15.8   6.2 2000s   9 5.77 40.6 10.7  8.0  40.7 2010–2014   3 4.79 51.1 30.5 –5.6  24.0 Total  33 6.04 46.0 20.5  9.3  24.2

d. Middle-income economies that stay middle income in the ensuing decade Observations Aggregate output growth (%)

% contributions to output growth

Capital Labor Human capital Total factor productivity

1960s  40 5.63 43.0 10.8 8.5  37.7 1970s  34 5.35 60.2 20.4 9.7   9.7 1980s  38 2.75 67.9 44.5 24.8 –37.2 1990s  42 2.68 69.8 34.3 20.1 –24.3 2000s  43 4.17 48.6 15.6 10.3  25.5 2010–2014  46 4.04 57.3 23.1 11.9   7.7 Total 243 4.07 55.5 21.9 12.8   9.8

e. Middle-income economies that rise to high income in the ensuing decade Observations Aggregate output growth (%)

% contributions to output growth

Capital Labor Human capital Total factor productivity

1960s   5 4.51 37.7 21.5 15.1  25.7 1970s  14 4.04 57.4  2.7 13.4  26.5 1980s   4 5.57 49.8 12.9 10.8  26.5 1990s   9 3.83 56.7 15.7 12.0  15.7 2000s  11 4.22 36.5  5.5  9.5  48.6 2010–2014   7 4.44 58.8 14.6  7.9  18.7 Total  50 4.27 50.0 10.3 11.4  28.3

Note: Growth accounting is based on data collected from Penn World Table 9.0.

2.1.2 The middle-income trap in Latin America and the Caribbean: The vital role of productivity growth Very few economies in Latin America and the Caribbean

have managed to move from middle income to high income.a

Why has the middle-income trap been so pernicious for that region? What were the main challenges and how have policy makers managed to address them?

One fundamental reason for the middle-income trap for Latin America and the Caribbean has been low productivity growth. While the 1980s is referred to as the lost decade in terms of growth, it was even worse in terms of productivity, with the region never fully recovering ground in its debt crisis.

The poor performance of the region in the 1980s is evident in the box figure, which plots global shares of per capita GDP. Although the 1990s featured a strong reform agenda that saw trade and capital accounts liberalized in many economies and widespread privatization, the results

were mixed. Growth spurts in some economies ending in financial crises, an outcome arguably related to volatile global capital flows and the opening of capital accounts even while financial systems remained relatively weak. The 2000s saw some progress as commodity exporters were aided by a boom in commodity prices and many economies enjoyed a demographic bonus from fast growth in the working-age population.b

The relatively low growth of productivity in Latin America and the Caribbean has several facets. Estimates indicate significant inefficiency in the allocation of resources, including the expansion of low-productivity services and the presence of very small and often informal firms that drag down measures of economic efficiency. In the formal sector, there appear to be inefficiencies even in manufacturing for lack of large and highly productive companies and the persistence of less efficient smaller firms. Some sectors have seen relatively high productivity growth, however, notably agriculture.c

a _{The World Bank counts high-income economies are those}

with a gross national income per capita of $12,476 or more in 2015. By this classification, Chile and Uruguay are the two countries among the 26 that borrow from the Inter-American Development Bank that transitioned from upper-middle to high income in recent years.

b _{A growth accounting exercise is presented in Inter-American}

Development Bank. 2014. Latin American and Caribbean

Macroeconomic Report, Appendix A. http://www.iadb.org/en/

research-and-data/publication-details,3169.html?pub_id=IDB -AR-109

c _{A general review of productivity in Latin American and the}

Caribbean is available in Inter-American Development Bank. 2010. The Age of Productivity: Transforming Economies from the

Bottom Up. http://www.iadb.org/en/research-and-data/

dia-development-in-the-americas-idb-flagship-publication,3185 .html?id=2010

Source

Inter-American Development Bank using data from International Monetary Fund, World Economic Outlook, October 2016. Normalized global share of GDP per capita

0.4 0.6 0.8 1.0 1.2 1.4 1.6 1980 1985 1990 1995 2000 2005 2010 2015 2020 % Average Peru Ecuador Colombia Argentina Uruguay Mexico Costa Rica Brazil Venezuela Panama Dominican Republic Chile

Note: Each line is normalized by the simple average of that country GDP per capita so if the GDP per capita share were to stay constant the result is a horizontal line at 1.0. Average is the simple average of 26 IDB Borrowing Countries. Based on underlying dollar values using PPP exchange rates.

Source: Inter-American Development Bank based on data from International Monetary Fund, World Economic Outlook October 2016.