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Central America experienced moderate growth during the last decade, including in the years leading up to the global financial crisis, but the rate of convergence toward advanced country income levels has still been slow. Moreover, forecasts imply that these trends will continue. What can be done to spur higher growth in Central America? We bring new data to bear on this question-version 7.0 of the Penn World Table and a new IMF database on structural reforms. Our cross-country panel regression of economic growth using System GMM captures the importance to growth of conditional convergence, factor accumulation, and macro policies. In addition, structural efficiency is a significant factor in explaining growth performance. We construct a broad index of efficiency and find that increasing the degree of structural efficiency by one standard deviation raises growth by ½ percent. This implies that Central American countries could significantly increase their long-run growth rates by increasing the flexibility of markets and improving the quality of regulation.

Central America--Economic policy. --- Economic development--Econometric models. --- Economic policy. --- Economic nationalism --- Economic planning --- National planning --- State planning --- Economics --- Planning --- National security --- Social policy --- Finance: General --- Foreign Exchange --- Labor --- Macroeconomics --- Multiple or Simultaneous Equation Models: Models with Panel Data --- Institutions and the Macroeconomy --- Macroeconomic Analyses of Economic Development --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Institutions and Growth --- Measurement of Economic Growth --- Aggregate Productivity --- Cross-Country Output Convergence --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Personal Income, Wealth, and Their Distributions --- General Financial Markets: General (includes Measurement and Data) --- Labour --- income economics --- Finance --- Currency --- Foreign exchange --- Human capital --- Structural reforms --- Personal income --- Commodity markets --- Purchasing power parity --- Macrostructural analysis --- National accounts --- Financial markets --- Income --- Commodity exchanges --- El Salvador --- Economic development --- Econometric models. --- Central America --- Income economics

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This paper studies the potential for the export sector to play a more important role in promoting growth in Central America, Panama, and the Dominican Republic (CAPDR) through deeper intra-regional and global trade integration. CAPDR countries have enacted many free trade agreements and other regional integration initiatives in recent years, but this paper finds that their exports remain below the norm for countries of their size. Several indexes of outward orientation are constructed and suggest that the breadth of geographic trading relationships, depth of integration into global production chains, and degree of technological sophistication of exports in CAPDR are less conducive to higher exports and growth than in fast-growing, export-oriented economies. To boost exports and growth, CAPDR should implement policies to facilitate economic integration, particularly building a customs union, harmonizing trade rules, improving logistics and infrastructure, and enhancing regional cordination.

Commerce --- Business & Economics --- International Commerce --- International trade. --- Economic development --- Development, Economic --- Economic growth --- Growth, Economic --- External trade --- Foreign commerce --- Foreign trade --- Global commerce --- Global trade --- Trade, International --- World trade --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- International economic relations --- Non-traded goods --- Exports --- Central America --- Economic integration. --- E-books --- International trade --- Exports and Imports --- Taxation --- Trade Policy --- International Trade Organizations --- Empirical Studies of Trade --- Economic Integration --- Economic Growth of Open Economies --- Macroeconomic Analyses of Economic Development --- Trade: General --- Financial Aspects of Economic Integration --- International economics --- Public finance & taxation --- Tariffs --- Customs unions --- Regional integration --- Service exports --- Taxes --- Economic integration --- Tariff --- Protectionism --- International economic integration --- United States