The Use of Decomposition Methods to Understand the Economic Growth Gap between Latin America and East Asia

Understanding how growth factors contribute to explaining the large differences in rates across countries remains an important research agenda. The common approach exploring this issue is based on use of multiple linear regression analyses. This work contributes literature by applying a new perspective variance decomposition procedures: Shapley–Owen–Shorrocks and Oaxaca–Blinder. These methodologies have four main advantages with respect traditional methodologies: they make possible quantification relative contribution each factor economic growth, allow us estimate efficiency endowments factor, can be used any functional form estimation methods that are robust regarding endogeneity issues. We illustrate these analyzing causes gap between Latin America East Asia over period 1980–2014. find divergence two regions primarily explained institutions physical capital. In addition, results indicate higher Asian performance not only due its levels factors, but also use. connect our 2030 Agenda for Sustainable Development.