NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Policy-Driven Productivity in Chile and Mexico in the 1980s and 1990s

Raphael Bergoeing, Patrick J. Kehoe, Timothy J. Kehoe, Raimundo Soto

NBER Working Paper No. 8892
Issued in April 2002
NBER Program(s):   EFG   IFM

Both Chile and Mexico experienced severe economic crises in the early 1980s, but Chile recovered much faster than did Mexico. Using growth accounting and a calibrated dynamic general equilibrium model, we conclude that the crucial determinant of this difference between the two countries was the faster productivity growth in Chile, rather than higher investment or employment. Our hypothesis is that this difference in productivity was driven by earlier policy reforms in Chile, the most crucial of which were in banking and bankruptcy procedures. We propose a theoretical framework in which government policy affects both the allocation of resources and the composition of firms.

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Document Object Identifier (DOI): 10.3386/w8892

Published: Bergoeing, Raphael, Patrick J. Kehoe, Timothy J. Kehoe and Raimundo Soto. "Policy-Driven Productivity In Chile And Mexico In The 1980's And 1990's," American Economic Review, 2002, v92(2,May), 16-21. citation courtesy of

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