Brazil’s and Mexico’s economies collapsed almost simultaneously in the early 1980s. Their respective outputs per worker have remained in a state of near stagnation since then. We develop a comparative analysis to better understand what went wrong. Macroeconomic magnitudes (capital accumulation and technical progress) exhibit more similarities than differences.
These appear more starkly when productivity changes are analyzed at disaggregated levels: by regions, sectors of activity, tradability, firm size, and labor-market informality. Our empirical findings are consistent with a view that Brazil’s economic failure is linked to excessive protectionism; Mexico’s to heightened domestic polarization.