Territorial Productivity Differences and Dynamics within Latin American Countries

The paper documents the evolution of territorial disparities in labor and location productivityin 14 countries in Latin America, using millions of observations from harmonized household surveys and censuses.Between the early 2000s and the late 2010s, most countries in the region experienced significant reductions in regionalinequality as real labor incomes and location productivity premia converged at the first and second administrativelevels. The leveling up reflected both the slowdown in productivity growth in affluent predominantly urbanmunicipalities and the catchup of relatively poor, predominantly rural municipalities. Absolute convergencenarrowed the labor income gaps with leading metropolitan areas, including the disparitites exploitable throughmigration, especially among the bottom 40 percent of households, as cities de-industrialized, yet continued toattract migrants. On the eve of the Covid-19 pandemic, income disparities with leading metropolitan areas remainedhigh in nearly all countries, largely due to differences in educational attainment, but in a few countries, largedifferences in returns to endowments indicate potentially significant returns to migration to the leading metropolitanareas, especially for residents of relatively poor, remote regions. Rather than a clear rural-urban-metropolitandivide, in most countries the paper documents substantial overlap between the location-premia distributions ofdifferent types of second-level administrative areas and small differences between the average urban and rural placeproductivity premia.