June 2017

IZA DP No. 10843: Education, Governance, Trade and Distance: Impact on Technology Diffusion and the East Asia-Latin America Productivity Gap

This paper examines the impact of education, trade, governance and distance on technology diffusion and TFP in Latin America – specifically South America and Mexico (SAM) – and East Asia, over the 32 years preceding the Great Recession (1976–2007). Findings are: i) TFP rises with education, trade, governance (ETG) and trade's R&D content, and falls with distance to the (closest) North; ii) the East Asia – SAM education gap's impact equals that of trade plus governance; iii) an increase in SAM's ETG to East Asia's level raises TFP by over 100 percent and fully accounts for its TFP gap with East Asia; and iv) South America's TFP loss relative to Mexico due to its greater distance to 'US–Canada' (Europe and Japan) is 9.30 (0.02) percent.