Pathways to Growth: Comparing East Asia and Latin America.

Talvi, Ernesto; Serra, Pablo; Birdsall, Nancy; Pack, Howard; Solimano, Andrés; Stallings, Bárbara; Gavin, Michael; Sabot, Richard; Lustig, Nora; Petrei, Humberto; Edwards, Sebastián; Hausmann, Ricardo; Jaspersen, Frederick Z.; Cunha, Paulo Vieira da; Thomas, Vinod; Shirley, Mary M.; Page, John; Howard, Eleanor; Pfeffermann, Guy; Ross, David R.; Shilling, John D.; Boeker, Paul H.; Lee, Jisoon; Colodro, Eduardo Bitran

doi:10.2307/2137867

Cited by 10 publications

(1 citation statement)

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“…Based on cross-country Barro-style growth regressions, an increasing number of empirical studies have attempted to determine why East Asian countries grow faster than Latin American economies. Differences in fundamental growth factors such as physical capital [29,35,36], human resources [37][38][39] and institutional factors [40][41][42][43] have been identified as key. While our study is clearly not the first attempt to address the causes of the economic divergence between the two regions, our econometric approach represents an important novelty: we complement this literature using decomposition procedures.…”

Section: The Use Of Obd and Sosd To Understand East Asia's And Latin America's Growth Performancementioning

confidence: 99%

The Use of Decomposition Methods to Understand the Economic Growth Gap between Latin America and East Asia

2021

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Understanding how growth factors contribute to explaining the large differences in growth rates across countries remains an important research agenda. The common approach to exploring this issue is based on the use of multiple linear regression analyses. This work contributes to growth literature by applying a new perspective based on the use of variance decomposition procedures: Shapley–Owen–Shorrocks and Oaxaca–Blinder. These methodologies have four main advantages with respect to traditional methodologies: they make possible the quantification of the relative contribution of each factor to economic growth, they allow us to estimate the efficiency in the use of the endowments of each factor, they can be used with any functional form and they can be used with estimation methods that are robust regarding endogeneity issues. We illustrate these advantages by analyzing the causes of the economic growth gap between Latin America and East Asia over the period 1980–2014. We find that the economic growth divergence between the two regions can be primarily explained by the differences in institutions and physical capital. In addition, the results indicate that the higher East Asian performance is not only due to its higher levels of endowments in these factors, but also to the higher efficiency in its use. We connect our results with the 2030 Agenda for Sustainable Development.

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