Economic Growth In Latin America*

Journal

of Development

Economics

39 (1992) 59-84.

North-Holland

Economic growth in Latin America*
Jo& De Gregorio
International
Received

Monetary Fund, Washington DC, USA

March

1991, linal version

received

December

1991

This paper studies growth determinants
in 12 Latin American
countries
during the period
195&1985. In a growth accounting
framework, theshare of labor in income is found to be lower
in the sample group than in developed countries, while factor productivity
growth accounts for a
larger proportion
of growth in the fastest growing countries. Using panel data, macroeconomic
stability is found to play, in addition
to investment
(physical and human), a crucial role in
growth. To a lesser extent, growth is negatively correlatedwith government
consumption
and
political instability. The terms of trade appear to have no significant effect on growth.

1. Introduction
In the last few years the literature
on economic
growth
has been
characterized
by numerous
and interesting
new developments,
as well as by
the rediscovery
of old, though
somewhat
forgotten,
insights.’
In the
empirical
field, many papershave attempted
to test the implications
of
economic growth theories and to determine the main sources of growth using
cross-section
data for large samples of countries.
This paper studies
growth
determinants
in Latin
America.2
Mainly
because of data limitations,
this paper focuses on 12 countries
during the
195C-1985 period (see table 1). Latin America provides a relativelyhomogeneous sample of countries with enough policy experiments
to adequately
assess the sources of growth that have been analyzed in larger cross-sections
of countries. In studying the growth experience of Latin American countries,
several approaches
are used. First, some basic indicators
bearing on growth
performance
are examined.
Next, growth accounting
exercises are underCorrespondence to: Dr.Jo& De Gregorio,
International
Monetary
Fund, Washington,
DC
20431, U.S.A.
*This paper was prepared for the fourth meeting of the Interamerican
Seminar on Economics,
Santiago, Chile, March 15-16, 1991. I am very grateful to Rudi Dornbusch
and Peter Wickham
for valuable comments
and extensive discussions.
I also would like to thank Eliana Cardoso,
Juan Eduardo
Coeymans, JestFajgenbaum,
Albert Fishlow, Jordi Gali, Pablo Guidotti,
Ross
Levine, Manuel MarfAn, Carmen Reinhart, Miguel Savastano,
And& Solimano, John Williamson, and participants
at the Seminar for helpful comments,
and Catherine
Fleck for editorial
assistance. The views expressed in this paper do not necessarily represent those of the IMF.
‘See, for example, Romer (1986), Lucas (1988) and Rebel0 (1991).‘1 have found few studies about sources of growth in Latin America. See Cardoso
and
Fishlow (1989) and the references therein.
03043878/92/$05.00

J.D.E.-

c

0

1992-Elsevier

Science Publishers

B.V. All rights reserved

GDP

per capitab

1.6
2.4
2.1
1.9
2.6
3.1
2.8
3.0
3.1
2.5
0.9
3.7

Populationb

2.4
0.8
Argentina
2.1
0.2
Bolivia
1.5
4.1
Brazil
2.80.9
Chile
4.9
2.3
Colombia
5.6
2.4
Costa Rica
5.7
2.8
Ecuador
4.0
0.9
Guatemala
5.8
2.5
Mexico
4.0
1.5
Peru
1.5
0.5
Uruguay
3.5
-0.2
Venezuela
~___
“All data for GDP and GDP per capita are in real terms.
bGrowth rates in percent per annum.
‘As a percent of GDP.
dPercent per annum.
‘Period averages in 1980 U.S. dollars.
Sources: Summers and Heston (1988), ECLAC, andIFS.

GDP”

____~

Table
for Latin

Terms of trade”
~~
~____~
-1.2
2.3
-2.3
- 1.4
-0.5
-0.5
-1.8
-2.1
0.9
1.3
-1.3
3.4

Basic indicators

1

Inflation”
15.3
62.5
55.5
53.0
14.8
9.0
9.2
4.4
15.2
25.4
40.4
4.8

25.1
12.9
24.4
29.1
18.8
14.2
24.1
8.8
18.8
13.2
12.1
11.7

195&1985.”

Investment’

America,

1,194
1,208
938
1,154...