What Makes a Difference in Achieving Higher Labor Productivity? The Case of Low-Income Countries in Latin America

By:
Osvaldo Nina

Abstract:
This paper uses firm level surveys from Ecuador, Guatemala, Honduras and
Nicaragua to estimate the determinants of labor productivity. This study started
out with the hypothesis that the adverse external business conditions that firms
in poor Latin American countries face, may be an important explication of the
generally low levels of productivity. However, the empirical results, based on
the survey of more than 1300 businesses, do not confirm this hypothesis.
Compared to all the variables that are under the firms control, such as capital
intensity, energy use, and worker skills, the external business environment
(macroeconomic instability and labor regulations) has very little impact on
productivity.

Working Paper Nº 04/2005

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