Growth, structural change and technological capabilities Latin America in a comparative perspective

Abstract

Countries differ in terms of technological capabilities and complexity of production structures.According to that, countries may follow different development strategies: one based onextracting rents from abundant endowments, such as labor or natural resources, and the otherfocused on creating rents through intangibles, basically innovation and knowledgeaccumulation. The present article studies international convergence and divergence, linkingstructural change with trade and growth through a North South Ricardian model. The analysisfocuses on the asymmetries between Latin America and mature and catching up economies.Empirical evidence supports that a shift in the composition of the production structure in favorof R&D intensive sectors allows achieving higher rates of growth in the long term andincreases the capacity to respond to demand changes. A virtuous export-led growth requireslaggard countries to reduce the technological gap with respect to more advanced ones. Hence,abundance of factor endowments requires to be matched with technological capabilitiesdevelopment for countries to converge in the long term.