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Microeconomic Flexibility in Latin America

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  • Ricardo J. Caballlero
  • Eduardo Engel
  • Alejandro Micco

Abstract

We characterize the degree of microeconomic inflexibility in several Latin American economies and find that Brazil, Chile and Colombia are more flexible than Mexico and Venezuela. The difference in flexibility among these economies is mainly explained by the behavior of large establishments, which adjust more promptly in the more flexible economies, especially when accumulated shocks are substantial. We also study the path of flexibility in Chile and show that it declined in the aftermath of the Asian crisis. This decline can account for a substantial fraction of the large decline in TFP-growth in Chile since 1997 (from 3.1 percent per year for the preceding decade, to about 0.3 percent after that). Moreover, if it were to persist, it could permanently shave off almost half of a percent from Chile's structural rate of growth.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10398.

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Date of creation: Mar 2004
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Publication status: published as Caballero G., Ricardo, Eduardo Engel G., and Alejandro Micco A., 2004. "Microeconomic Flexibility in Latin America," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 7(2), pages 5-26, August
Handle: RePEc:nbr:nberwo:10398

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  12. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
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