Description

After a decade and a half of economic growth above 7% per year, the Chilean economy has been growing at rates below 3% during the last five years. In this article we suggest that in order to produce a new surge in economic growth, Chile needs a productivity shock arising from economic policy initiatives aimed at improving economic efficiency and institutions. Although Chile has a good record in both, it is still possible to have an upgrade. We run a cross section regression in which the dependent variable is total factor productivity. We conclude that modest changes in the country’s policies and institutions may increase Chile’s rate of growth in 1.5 percent points.