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A central question in economics is why some countries are substantially richer than others. The income per capita of the five richest countries in the world is 30 times the income of the five poorest. It is a fundamental quantitative question for which growth and development economists still have no definite answer. The first chapter of this dissertation contributes to this literature. The chapter offers new evidence on the sources of cross-country income differences by investigating the role public capital in development accounting. I explicitly measure private and public capital stocks, and I find large differences in both types of capital across countries. Moreover, differences in private capital are larger than the ones I find for total capital for the richest and poorest countries. The methodology I use implies a share of public capital in output of at most 10%. My findings indicate that differences in capital stocks can not account for a substantial part of the observed dispersion in income across countries .
Other macroeconomic facts of underdeveloped and developing economies may also explain their low income per capita. These facts may be related to economic policies that could distort the allocation of resources in these economies. In the second chapter of this dissertation I document differences in labor supply between a set of Latin American countries and the U.S. in the period 1990-2005. In the U.S. the female labor force participation was 69% by 1990, while in Brazil and Mexico was 39% and 37%, respectively. Females began to participate more in the labor market of these countries after more households acquired access to basic infrastructure and when distortive policies affecting the price of household appliances were partially removed. I use a model of home production with endogenous labor force participation to account for these facts. I conclude that the price of household appliances and access to infrastructure are quantitatively important in explaining cross-country labor supply differences.