DIA 2016: Chapter 10: Firm Productivity As An Engine Of Saving (Tables and Figures)
Saving rates are relatively low in Latin America and the Caribbean, as is productivity growth. Are these two facts related? Much of this book has argued that indeed, a relationship exists and that the direction of causality runs from savings to productivity, via investment. Low saving rates constrain investment in vital infrastructure such as roads, ports, and telecommunications, which in turn takes its toll on the growth of aggregate total factor productivity (TFP). Without the necessary infrastructure, firms cannot be fully efficient in the production process. Thus, low saving rates impede productivity growth and result in poor economic performance.