New Economics Papers
on Central and South America
Issue of 2005‒01‒02
four papers chosen by

  1. Sources of Economic Growth and Total Factor Productivity in Chile By Rodrigo Fuentes; Mauricio Larraín; Klaus Schmidt-Hebbel
  2. Patterns of Specialization and Economic Growth in Chile by Sector By Roberto Álvarez; Rodrigo Fuentes
  3. Education and Economic Growth in Chile By Andrea Tokman
  4. Latin America in the Rearview Mirror By Harold L. Cole; Lee E. Ohanian; Alvaro Riascos; James A. Schmitz, Jr.

  1. By: Rodrigo Fuentes; Mauricio Larraín; Klaus Schmidt-Hebbel
    Abstract: The purpose of this paper is to provide a decomposition of economic growth in Chile, based on the contribution of capital, labor, and total factor productivity (TFP) and to study the determinants of TFP behavior in Chile since 1960 to date. Our results indicate that the contribution of TFP to growth differs significantly from one period to another. During 1961-1973 the contribution of capital dominates,labor takes over in 1974-1989, and TFP in 1990-2003. Evidence on TFP determinants suggests that,besides cyclical factors, TFP growth reflects the impact of macroeconomic stabilization and structural reforms. The interaction of both factors in TFP behavior is worth noting. Evidence suggests also that, under conditions of high macroeconomic instability, the effects of a structural reform on TFP are smaller, and vice versa. An analogous situation can be expected from macroeconomic stabilization efforts.
    Date: 2004–12
  2. By: Roberto Álvarez; Rodrigo Fuentes
    Abstract: This paper discusses the implications on sector growth within the context of a specialization model based on factor endowment. The empirical literature is examined, which reveals that the only way for the economy to alter its specialization patterns toward the production of goods that are characteristic of higher development is to change its endowment of resources accordingly. For that, investment in both human and physical capital must be increased. The paper also studies growth patterns by sectors and finds a high degree of heterogeneity. More aggregate results, separating between tradables and nontradables over the years of fast economic growth (1986-1998), show that the contribution of TFP is as important as the accumulation of capital and labor in explaining the years of fast growth of the nontradable sector (1987-1991), while in 1992-1998, this sector’s expansion was due only to factor accumulation. On the contrary, the tradable sector increased thanks to the accumulation of capital and labor, with almost no increase in productivity in 1987-1991, while TFP was significant in explaining growth between 1992 and 1998.
    Date: 2004–12
  3. By: Andrea Tokman
    Abstract: Human Capital, or more precisely education, plays an important role in economic growth. Chile's structural reforms in this front have contributed with more than one percentage point of higher growth during the nineties. If we continue in the same human capital trend growth, or even better, if we achieve radical changes that puts us at the standards for developed nations, we could benefit from substantially higher growth rates. This paper critically reviews the Chilean education system and identifies quality as its mayor problem. We study the reforms and their effects on quantity and quality of education and propose further changes that will generate substantial improvements and potential benefits in increased future growth.
    Date: 2004–12
  4. By: Harold L. Cole; Lee E. Ohanian; Alvaro Riascos; James A. Schmitz, Jr.
    Abstract: Latin American countries are the only Western countries that are poor and that aren't gaining ground on the United States. This paper evaluates why Latin America has not replicated Western economic success. We find that this failure is primarily due to TFP differences. Latin America's TFP gap is not plausibly accounted for by human capital differences, but rather reflects inefficient production. We argue that competitive barriers are a promising channel for understanding low Latin TFP. We document that Latin America has many more international and domestic competitive barriers than do Western and successful East Asian countries. We also document a number of microeconomic cases in Latin America in which large reductions in competitive barriers increase productivity to Western levels.
    JEL: O1 O4
    Date: 2004–12

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