by Evans and Rauch and finds that if the quality of Chile’s public administration had been equal to that of Hong Kong in 1970-1990, its growth rate would have been as much as 1.5 percentage points higher per year. Kaufmann et al. (1999) construct a database with a number of variables on governance, including the regulatory framework. Here Chile ranks 18th among 145 countries, which puts it above most other countries of similar per-capita income, but well behind countries such as the US, the UK and New Zealand. Corruption is a variable that undermines the proper functioning of institutions. These authors also construct an index of corruption control, in which Chile is again well ranked (24 among 136) but still far behind the leaders. The index goes from +2.5 (the less corrupted) to –2.5 (the more corrupted). Chile has 1.03, which well above the mean but behind countries such as New Zealand (2.1), Canada (2.1) or the US (1.4). Government spending A somewhat different way to see this problem would be to assess the efficiency of government spending. During the 1990s there has been significant increase in government expenditure in Chile. While in 1990 the general government spending represented 22% of GDP, by the end of the decade the figure had climbed to 26.4%. The question that arises is whether higher government spending has resulted in more and better government services. A recent study of the public health system by Rodríguez and Tokman (2000) shows that the growth of government spending has not generated a corresponding increase in the services produced in this sector. While government spending on health has risen by 190%, total services have increased by only 22%. This means that the productivity of expenditure has fallen by over 50%. Beyer (2001) calculates that if productivity were at
12 its 1990 level, the public health system today could provide additional services worth about 1.5% of GDP. Education Human capital is one of the variables to have attracted most attention in the economic growth literature. 5 Barro (1999) applies his cross-section growth regressions to the Chilean case, and estimates that if the quality of education in this country were at a level compatible with its per-capita income, growth would be as much as two percentage points higher per year. Barro uses scores achieved in an international science test to measure education quality. 6 Although education is not one of the focus variables in this article, we are convinced that is one of the major forces behind economic growth. Moreover, measuring education quality through international examination scores clearly reveals this as an area in which Chile performs well below its development level. This suggests that growth could be significantly accelerated if education quality were improved. We return to this point in section 4.
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- Summer '18
- Sagar Arora
- The Land, TFP