Differences in living standards around the world are substantial, with income per worker in the richest countries up to 60 times higher than in the poorest. Even as measures of the stock of physical and human capital have become more reliable over time, aggregate productivity still remains the biggest contributor to these striking income gaps. What, then, could explain these vast productivity differences across countries? In this Policy Research Talk on February 23, 2021, World Bank economist Roberto N. Fattal Jaef discussed the role of distortions in firms¡¯ business environment that reduce competition, innovation, and allocative efficiency.
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