Trade and Productivity in Latin America: Field Research in Colombia

Class of 2017 MIEF students Simon Staley and Valentin Sierra spent their 2017 spring break in Bogotá, Colombia, interviewing ministers, senators, presidential advisors, bank presidents and think tank directors as part of their capstone project. The team is investigating the drivers of low productivity in Latin America under the guidance of Dr. Nicholas Coleman, SAIS lecturer and senior economist at the U.S. Federal Reserve. The team has especially focused their research on Colombia, as the nation currently faces a unique opportunity to improve its productivity and growth after ending decades of armed conflict with a powerful insurgent group.

Productivity growth has been identified by leading multilateral organizations like the World Bank, IMF, OECD and the Inter-American Development Bank (IADB) as key to sustainable, long-term economic growth in Latin America. Historically productivity (total factor productivity in economics jargon), has been low in Latin America compared to other emerging market regions. According to these multilaterals, increasing productivity could yield an economic windfall for the region, improving growth and livelihoods for millions.

“Decreasing TFP has been at the heart of slow productivity growth ... GDP per worker in Colombia shows that slow growth since the 1980s is largely because of a reduction in TFP.”
— OECD, 2013

The key drivers of productivity growth include socioeconomic factors like labor informality, poor education, inadequate infrastructure and weak application of the rule of law, in addition to various indicators of development. The team is conducting a comprehensive econometric analysis of 18 countries in Latin America, applying well-documented methodology in the context of the region and expanding existing literature by investigating the effect of trade openness on productivity.

“... productivity growth is the key to unlocking sustainable growth [in Latin America].”
— The Economist, 2014

Taken together with the expert testimonies of the Colombian practitioners, the results of this econometric analysis will quantify the contributions of the various drivers to productivity growth in Latin America and help inform policy recommendations for post-conflict Colombia.

The team plans to make their findings public through a new Greater Washington-based nonprofit called Consulting Peace and will present the report in both English and Spanish to contacts in the Colombian government.