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Toward a Modern State in Chile: Institutions, Governance, and Market Regulation

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  • Eduardo Saavedra
  • Raimundo Soto

    ()
    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

Chile, as most Latin American countries, inherited the language, religion, and the institutions from 16th century Spanish conquerors. Most institutions have not changed since. This paper examines the institutional and economic structure of the State in Chile. It concludes that in several dimensions the current structure is incompatible with an adequate functioning of market economies, as those intended by the economic reforms implemented during the last three decades of the last century. The country needs to implement reforms in the administration of the State, the working of the Judiciary system, and the incentives and operation of regulatory agencies. Their combined negative effects imply that the benefits of reforms, privatization and market liberalization are partially dissipated in the form of inefficiency and rent seeking behaviour. In turn, this suggest that it is unlikely that the Chilean economy will reach the high growth rates necessary to overcome under development. Our main conclusion is that, in order to implement a framework in which the State acts mainly as regulator and competition supporter, it is necessary to undertake profound changes in the structure of incentives in which it currently operates. Five elements are at the center of this far-reaching evolution away from centralism, stagnation, and inefficiency: (1) the divestiture of state-owned enterprises, (2) the upgrade and update of regulatory agencies and the institutional framework in which they operate, (3) the improve of competition policy institutions, (4) the improvement of consumer rights protection, and (5) a substantial improvement in the working of the Judiciary system

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Bibliographic Info

Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 277.

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Date of creation: 2005
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Handle: RePEc:ioe:doctra:277

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  1. Federico Basañes & Eduardo Saavedra & Raimundo Soto, . "Post-Privatization Renegotiations and Disputes in Chile," ILADES-Georgetown University Working Papers inv117, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  2. Mark White, 1997. "Legal Practice and Economic Adaptation," Economic History 9703001, EconWPA.
  3. Antonio Estache & Eduardo Bitrán & J.L. Guasch, 1999. "Privatizing and Regulating Chile's Utilities, 1974-2000: Successes, Failures and Outstanding Challenges," ULB Institutional Repository 2013/44074, ULB -- Universite Libre de Bruxelles.
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