Why are some countries much more prosperous than others? This book argues that differences in average labor productivity, patterns of structural change, and labor misallocation across sectors explain most of the observed differences in economic prosperity around the world. The work employs quantitative calibration methods to demonstrate that cross-country income variations primarily reflect productivity disparities. It examines labor productivity’s determinants—physical capital, human capital, and aggregate efficiency—and analyzes how sectoral labor misallocation diminishes productivity, using Latin America and East Asia as comparative cases.