Competitiveness and Growth in LAC: Competitiveness and Growth in LAC: The Chilean CaseThe Chilean Case

Comments to:Comments to:

Juan Blyde, IDBJuan Blyde, IDB

Much improved versionMuch improved version

- Much better organization- Much better organization

- Clarity of the ideas- Clarity of the ideas

- Better definition of variables, tests, procedures, etc.- Better definition of variables, tests, procedures, etc.

- Arguments and conclusions are more in line with the evidence presented- Arguments and conclusions are more in line with the evidence presented

- More clarity about which constraints are binding and which are not- More clarity about which constraints are binding and which are not

Good methodological aspectsGood methodological aspects

- Fairly large use of microeconomic data- Fairly large use of microeconomic data

- Extensive use of Rajan and Zingales type of exercises- Extensive use of Rajan and Zingales type of exercises

- Effort to observe prices- Effort to observe prices

- Consistent benchmarking comparisons- Consistent benchmarking comparisons

No equal treatment of No equal treatment of potential constraintspotential constraints

No equal treatment of No equal treatment of potential constraintspotential constraints

PercentilePercentile

Rank (0-100)Rank (0-100)

Property Rights (WEF-GCR) 76Property Rights (WEF-GCR) 76

Control of Corruption (WEF-GCR) 88 Control of Corruption (WEF-GCR) 88

Ease of Doing Business Rank (Doing Business, 2006) 84Ease of Doing Business Rank (Doing Business, 2006) 84

Flexibility of labor regulation (Djankov et al) 56Flexibility of labor regulation (Djankov et al) 56

No equal treatment of No equal treatment of potential constraintspotential constraints

PercentilePercentile

Rank (0-100)Rank (0-100)

Property Rights (WEF-GCR) 76Property Rights (WEF-GCR) 76

Control of Corruption (WEF-GCR) 88 Control of Corruption (WEF-GCR) 88

Ease of Doing Business Rank (Doing Business, 2006) 84Ease of Doing Business Rank (Doing Business, 2006) 84

Flexibility of labor regulation (Djankov et al) 56Flexibility of labor regulation (Djankov et al) 56

Enforcing contracts (Doing Business, 2006) 58Enforcing contracts (Doing Business, 2006) 58

Closing a business (Doing Business, 2006) 39Closing a business (Doing Business, 2006) 39

On Labor RegulationOn Labor Regulation

- The effect of labor regulations on employment growth: potential - The effect of labor regulations on employment growth: potential problems of endogeneity. Also potential problems of misspecification. problems of endogeneity. Also potential problems of misspecification. Check on Hallward-Driemeier and Pages (2007)Check on Hallward-Driemeier and Pages (2007)

- Labor regulations should have negative effects particularly on - Labor regulations should have negative effects particularly on industries with higher liquidity requirements (Bennett, 2006). Possibility industries with higher liquidity requirements (Bennett, 2006). Possibility to do a Rajan-Zingales type of analysisto do a Rajan-Zingales type of analysis

TFP and Self-DiscoveryTFP and Self-Discovery

- The paper acknowledges that Chile is poorly located in the product - The paper acknowledges that Chile is poorly located in the product space -> the current opportunities for structural transformation are space -> the current opportunities for structural transformation are limitedlimited

- After 1997, the economy slowed down due to a combination of a - After 1997, the economy slowed down due to a combination of a negative contribution of labor growth and a much smaller growth in TFP negative contribution of labor growth and a much smaller growth in TFP - There is not an explicit effort in the paper to address these facts - There is not an explicit effort in the paper to address these facts

- One possibility: One possibility:

Long process of trade liberalization -> efficiency gains from a better Long process of trade liberalization -> efficiency gains from a better re-allocation of resources. Consolidation of the gains from early and re-allocation of resources. Consolidation of the gains from early and late liberalizations explains growth of TFP in the 1990s late liberalizations explains growth of TFP in the 1990s

The efficiency gains have been already realized. There is little space forThe efficiency gains have been already realized. There is little space for

factor productivity to continue growing in this way -> TFP slowed down factor productivity to continue growing in this way -> TFP slowed down

Further (sustained) gains in productivity require a process Further (sustained) gains in productivity require a process

of structural transformation that is only incipient -> TFP remains lowof structural transformation that is only incipient -> TFP remains low

Slow TFPSlow TFP

- Has the paper exhausted all the possible factors behind the slow - Has the paper exhausted all the possible factors behind the slow TFP? TFP?

Nice paper!Nice paper!