Patricio Meller

The translog production function: Some evidence from establishment data

Abstract This paper uses cross-section data from individual establishments to estimate directly, i.e., without using side conditions, translog functions for 44 four-digit ISIC Chilean manufacturing industries. Main results are: (1) The null hypothesis that the production function is Cobb-Douglas cannot be rejected for 39 out of 44 four-digit ISIC industries. (2) The null hypothesis of constant returns to scale cannot be rejected for 35 out of 44 industries; the remaining 9 sectors show evidence of increasing returns to scale.

Adjustment and social costs in Chile during the 1980s

Abstract Traditional analysis of adjustment programs tends to underestimate the welfare costs because it assumes that a contraction of nontradable production will close the expenditure-income gap, while the resulting excess supply of tradables will automatically be exported. In Chile, however, tradable output contracted sharply, falling almost two-thirds as much as nontradable output. The conventional analysis also ignores the effect of adjustment on unemployment rates and on real wages. This paper argues that the adjustment measures of the 1980s were regressive even though the government was successful in targeting its expenditures toward the very poor during the period of fiscal retrenchment. Among the regressive adjustment measures were the subsidies to holders of dollar-denominated debt provided by the central bank. In addition, policies to reduce expenditures raised the unemployment rate over 26%, reduced real wages by 20% for almost five years, and reduced health, housing and education budgets by 20% per capita. Finally, the required real devaluation raised the cost of living for the poor.

Growth, equity, and the environment in Chile: Issues and evidence

Abstract Chile has grown at an annual rate of 7% over the past decade. Income distribution, however, deteriorated for the poor and middle class before the economy reached full capacity, when real wages began to rise and unemployment to fall. Growth has been export-led, putting pressure on stocks of native forests and fishery and mining resources. Environmental quality worsened before 1990. Reversing these trends would require extra investments on the order of 1% of GDP over many years.

The Pattern of Industrial Concentration in Latin America

THE purpose of this study is to provide an empirical description of the structure of industrial concentration in the Latin American manufacturing sector.1 Eighteen two-digit ISIC (Industrial Standard International Classification) industries of ten Latin American countries constitute the sample of this study, and their employment entropy measurements are utilized as indicators of industrial concentration. Given the wide spectrum and large number of Latin American countries used, it is assumed that the results obtained are valid for Latin America as a whole. There are quite a large number of different indices of industrial concentration; also there are several variables that could be used for measuring concentration.2 In this study, employment entropy indicators are used. The reasons for this choice are as follows: (i) entropy indicators have properties that make them good proxies for measuring the degree of competition of an industry;3 (ii) the use of the employment variables facilitates international comparisons, and, in some countries, it is the only variable for which data are available. Entropy figures reflect two facts: (i) the number of firms of an industry, and (ii) the distribution of employment among those firms. Conceptually, entropy is inversely related to concentration (see footnote 3). Published data of the Census of Manufactures for ten Latin American

US multinationals and Latin American manufacturing employment absorption

Abstract The main purpose of this study is to examine the impact of US affiliates of multinational corporations on the generation of employment in the Latin American manufacturing sector. The emphasis of the analysis is mainly empirical, and an important by-product is the collection and processing of information about the quantitative evidence on the role of US MNCs in the Latin American manufacturing sector. The study focuses on seven countries (Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela) and attempts to answer the following types of questions. Do MNC affiliates constitute a quantitatively significant mechanism in the generation of employment? is the technology employed by MNC affiliates labour-saving? does the presence of the MNCs result in an expanded market with important increases in the sources of employment? The implicit alternative used in this study to examine such questions is the domestic enterprise of similar size to the existing US affiliate located in the corresponding manufacturing branch.

A simple macro model for a small open economy facing a binding external constraint (Chile)

Abstract In this paper a Keynesian macroeconomic model for a small open economy is used, which describes the functioning of the real part of the economy in the short run when facing a dominant external restriction. The main conclusions of this paper are: (1) In the Chilean case, a devaluation has a contractionary impact in the short run, i.e., a 10% real devaluation produces a 3.4% drop on the level of output. The non-fulfilment of the Marshall-Lerner condition accounts for only 30% of the output contraction, while the remaining 70% corresponds to the decline in consumption that is induced by the reduction in real wages. (2) When the economy has an external deficit, the adequate combination of exchange and fiscal policies to restore the Balance of Payments equilibrium which minimizes the decline of output depends on the magnitude of the devaluation. Thus, an ‘over-shooting’ in the exchange rate, together with a contractionary fiscal policy, would produce an unnecessarily deflationary impact in the short run. (3) The Chilean empirical evidence shows that when there is a dominant external constraint, the magnitude of the short run trade-off between real wages and employment is not very acute. The short-run elasticity of employment with respect to the real wage is 0.34.

Perspectives on Latin American Technological Innovation

In the global economy of the twenty-first century, technological innovation is fundamental for emerging countries to achieve three interrelated goals: to increase economic growth, to raise international competitiveness, and to generate a path toward convergence with developed economies. Yet Latin America’s capability for technological innovation remains stubbornly low. This chapter analyzes why Latin American productive enterprises spend relatively little on research and development (R&D), and considers whether the region can develop an innovative and Schumpeterian entrepreneurial capacity.

The Economic Model of the Military Dictatorship

The myth of Chilean democracy was deeply rooted: ‘the oldest and most stable democracy in Latin America’ in a region characterized by military coups and political instability. From 1831 to 1970 a long succession of presidents had been elected by vote, and all had completed and respected their terms of office. Of course, during a long lapse of time such as this there were short periods of conflict, but what other Latin America country could boast a similar record of 140 years’ continuous fulfillment of democracy? Chile’s historical tradition reiterated and maximized the democratic myth, ignoring any historic conflicts and events that might diminish it.

The Road to Socialism of the Unidad Popular

For most of the nineteenth century, Chile’s economy was fundamentally agricultural. Nearly 80 per cent of the population lived in rural areas before 1880, and even as late as 1930 the rural population was greater than the urban. In agriculture the latifundio or estate system predominated, with social relations of a semi-medieval type: on one side of the fence, there was the lord of the manor or latifundista, known as the ‘patron’, and on the other, the tenants or peasants. The latifundista provided his tenants with a hut and a bit of land, and protected them and looked after them in old age or when they got sick. For their part, the tenants obeyed and revered their ‘patron’; they lived and died on the land.1 Their standard of living was quite precarious, and they were isolated from urban, cultural, educational and political life; this situation lasted until well into the twentieth century.

A Tentative Synthesis

Following the tragic end of the UP government and the ‘grim legend’ engendered by the chaotic situation of that period, it is worth asking if there is anything left from this experience to take advantage of economically.