Productivity and Competiviness

Policies Underpinning Growth

Productivity and Competitiveness in the Global Economy

• higher prices are the result of more money flowing in an economy
• wage increases must be matched with productivity increase
• total product/production function = land+labor+capital
• perfect amalgamation of land, labor, capital, technology, GOVERNMENT POLICIES, and INFRASTRUCTURE will stimulate growth for Latin America

Measuring the Immeasurable: A Profile of Microfoundations for Growth in Latin America

• World Economic Forum focuses on productivity measurements; releases annual Global Competitiveness Report
• WEF's Global Competitiveness Index indicates economic prosperity projection
• Three-part Global Competitiveness Index
• 2. current welfare of public institutions
• 1. quality of macroeconomic environment
• 2. current welfare of public institutions
• 3. techonological readiness of economy

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• Each of the 3 parts has qualitative and quantitative submeasurements
• Business Competitiveness Index uses input, local demand, and supporting industry factors to measure microeconomic factors effecting firm performance
• Global Competitiveness Index -- 3 Stage growth
• Stage 1 basal health, education, and infrastructure improvement
• Stage 2 Efficiency improvement
• Stage 3 Sustained growth through sophistication and innovation

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Why is Productivity Growth in Latin America So Low?

• Chile being the exception, productivity is low in Latin America
• There is a lack of sustainable growth methods, most LA countries experience low rate at 5% average
• Physical capital is necessary for growth but doesn't explain when growth is fast or slow
• Human capital measurements are now more accurately measured through technology (total factor productivity)

Labor Productivity= Making People Better Off

• Productivity measurement = changes in output relative to labor over time
• Latiin America's stagnant productivity rate since 1990 = root of region's poverty
• low per worker production 1990-2005 = .21% production growth annually

Labor Markets: Good Jobs Wanted

• improper resource allocation = high unemployment rates
• inaccessible poor often not included in government unemployment figures
• figures also fragmented by those working in the US (Mexico in particular)
• slow technology growth = wage stagnation
• declining formal-sector conditions in the region damage poverty reduction endeavors
• fewer labor rights= more insecurity in labor market
• technological changes, higher educational attainment, decreased fertility, women's rights progress, household structural shifts, and increased consumerism all mean greater female labor force
• female labor force increase from 28% to 40%

Job Security versus Job Creation

• Unemployment underpinned by inadequate wage adjustments and job security
• Labor legislations to protect poor such as such as minimum wage and mandatory severance payments
• These measures led to distortion in the labor market
• forced severance payments leads to

The Rise of the Informal Sector

• Inadequate jobgrowth in the private sector=expansion of informal sector
• Informal sector=primary source of all jobs created

Science and Technology Policy: Accelerators

• 126 Million in Latin America work in informal sectors.
• 84 out of 100 new jobs are in informal sector
• Formal sector shrinks from 15% to 13%
• Formal sector grows larger in Bolivia, Panama, Paraguay and Venezuela
• 3 Areas of informal sector are 1) Microenterprises 2) Own account workers 3) Domestic service
• Microent

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