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Chile’s Growth and Development: Leadership, Policy-Making Process, Policies, and Results

Listed author(s):
  • Klaus Schmidt-Hebbel

This paper analyzes the relations between leadership, the policy-making process, policies and institutions, and development results in Chile. It starts with a stylized model for the dynamics of development that derives a Kuznets-type relation between growth and distribution of income, determined by the quality of leadership, the policy-making process, institutions and policies. This framework is applied to Chile, identifying the features of the policy-making process and leadership that allowed for continuation of growth-enhancing reform, with a stronger focus on equity goals, since the transition to democracy. As a result of three decades of reforms, Chile has recorded a quantum leap in economic growth, which is traced down to specific reforms. Yet Chile’s equity experience is much more mixed: poverty has declined massively but income remains highly concentrated, a likely result of shortcomings in the quality of education and in labor markets. The paper reviews the major risks to the country’s future development pace and points out the main reform challenges faced by policymakers. Ten lessons from Chile’s experience close the paper.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 507.

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Date of creation: Dec 2008
Handle: RePEc:chb:bcchwp:507
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  1. Eduardo Lora, 2001. "Structural Reforms in Latin America: What Has Been Reformed and How to Measure It," Research Department Publications 4293, Inter-American Development Bank, Research Department.
  2. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  3. Salvador Barrios & Eric Strobl, 2005. "The dynamics of regional inequalities," European Economy - Economic Papers 2008 - 2015 229, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  4. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March.
  5. Francisco Gallego Y. & Norman Loayza O., 2002. "The Golden Period For Growth In Chile: Explanations And Forecasts," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(1), pages 37-67.
  6. Engel, Eduardo M. R. A. & Galetovic, Alexander & Raddatz, Claudio E., 1999. "Taxes and income distribution in Chile: some unpleasant redistributive arithmetic," Journal of Development Economics, Elsevier, vol. 59(1), pages 155-192, June.
  7. Pablo T. Spiller, 2003. "The Institutional Foundations of Public Policy: A Transactions Approach with Application to Argentina," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(2), pages 281-306, October.
  8. Joaquín Vial & Cristobal Aninat & John Landregan & Patricio Navia, 2006. "Political Institutions, Policymaking Processes and Policy Outcomes in Chile," Research Department Publications 3222, Inter-American Development Bank, Research Department.
  9. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  10. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  11. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  12. Morawetz, David, 1977. "Income Distribution and Self-Rated Happiness: Some Empirical Evidence," Economic Journal, Royal Economic Society, vol. 87(347), pages 511-522, September.
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