These calculations clearly show that the key difference between this latest

These calculations clearly show that the key

This preview shows page 8 - 12 out of 34 pages.

These calculations clearly show that the key difference between this latest period (1998-2001) and the previous fourteen years of high economic growth (1984-1997) is TFP growth. As Table 1 shows, capital’s contribution to growth has been around 2.5 percentage points since the mid-1980s (1986-2000) and has not changed in recent years. On the other hand, labor’s contribution to growth averages 1.3 points but has accounted for a declining share in recent years. This is explained by a significant increase in unemployment since 1998. Finally, as mentioned above, TFP rose from two to three percentage points before falling back to a figure close to zero.
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9 GDP growth TFP Labor Capital 1976-1980 6.8 3.2 2.4 1.2 1981-1985 -0.1 -2.3 1.2 1.0 1986-1990 6.5 2.2 2.0 2.2 1991-1995 7.5 3.3 1.4 2.8 1996-2000 4.6 1.6 0.5 2.5 1998-2001* 2.9 0.4 0.1 2.4 *For 2001 the data are estimated. Source: Roldós (1997) and own estimations for the last period. Contribution of: Table 1 Chile: Components of Economic Growth
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10 Microeconomic efficiency Several different variables have been used in the literature to capture a country’s degree of microeconomic efficiency. In some of these indices, Chile is comparatively well placed compared to other developing countries, albeit well behind developed countries. In other indices, however, it lags behind countries of similar development level. Djankov et al. (2000) present a data set on the time and cost involved in starting up a new firm. In terms of time, the process takes in Chile 78 days, ranking it 55th out of 75 countries — far behind countries like Canada (2 days), United States (7 days), or even South Africa (30 days). On this measure Chile is in a worse position that most countries of similar per-capita income. In terms of monetary costs (in relation to per-capita GDP) Chile ranks 25th at 12% of per capita GDP. This is good compared to a country such as Israel (20%) but much higher than in the US or Canada (1%), Australia and Norway (2%), or even Turkey (3%). The Current Competitiveness Index published in the Global Competitiveness Report (2001) also provides information on microeconomic efficiency. This is an aggregate index intended to capture “an economy’s effective utilization of its current stock of resources”. The index is constructed from several variables, such as the number of permits needed and days taken to start up a new firm, bureaucratic red tape, and so forth. In terms of days taken to start up a new firm, Chile has more or less the same position as in the previous index (54th among 75 countries). In terms of permits, Chile ranks 35th with 5 permits, which is more than the UK (2), New Zealand (3) or the US (4), but less than Brazil (7) or Mexico (10). Evans and Rauch (1999) study the effects of State bureaucracy on growth, considering in particular salary structure and policy, along with the procedures used for hiring top managers in public administration. They find that the more that public
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11 managers are hired on merit, and the more attractive their salaries, the higher the economic growth of the country concerned. Valdés (2001) uses the coefficients obtained
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  • Summer '18
  • Sagar Arora
  • The Land, TFP

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