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In the last decades, Chile has made tremendous progress towards greater economic prosperity and lower poverty. Per capita income more than doubled over the past 20 years and is now the highest in Latin America. These progresses have now come to a halt. Since October 2019 Chile has faced two unprecedented shocks, the social protests and the COVID 19 outbreak.
This paper estimates potential output and the sources of growth in Chile during 1970-96. Actual output is cointegrated with the quality-adjusted measures of capital and labor, and constant returns to scale cannot be rejected. The estimates of potential output show a positive output gap in the years when the Chilean economy was deemed to be overheated. In 1986-90, the quality-adjusted labor variable explains close to 60 percent of the growth rate of GDP, while during 1991-95 capital formation plays a dominant role. The contribution of TFP growth in Chile is relatively small, but, based on a comparison with European and East Asian experiences, it is expected to increase in the medium term.
The politics of scientific advice across four environmental conflicts in Chile, when the state acted as a “neutral broker” rather than protecting the common good. In Science and Environment in Chile, Javiera Barandiarán examines the consequences for environmental governance when the state lacks the capacity to produce an authoritative body of knowledge. Focusing on the experience of Chile after it transitioned from dictatorship to democracy, she examines a series of environmental conflicts in which the state tried to act as a “neutral broker” rather than the protector of the common good. She argues that this shift in the role of the state—occurring in other countries as well—is driven in part by the political ideology of neoliberalism, which favors market mechanisms and private initiatives over the actions of state agencies. Chile has not invested in environmental science labs, state agencies with in-house capacities, or an ancillary network of trusted scientific advisers—despite the growing complexity of environmental problems and increasing popular demand for more active environmental stewardship. Unlike a high modernist “empire” state with the scientific and technical capacity to undertake large-scale projects, Chile's model has been that of an “umpire” state that purchases scientific advice from markets. After describing the evolution of Chilean regulatory and scientific institutions during the transition, Barandiarán describes four environmental crises that shook citizens' trust in government: the near-collapse of the farmed salmon industry when an epidemic killed millions of fish; pollution from a paper and pulp mill that killed off or forced out thousands of black-neck swans; a gold mine that threatened three glaciers; and five controversial mega-dams in Patagonia.
Malthus has prepared in this work the general rules of political economy. He calls into question some of the reasonings of Ricardo and attempts to defend Adam Smith.
Chile is a relatively stable, well-connected, open economy. Over the last decade the country has managed to increase its participation in global value chains and to export new products. However, its knowledge base is limited, productivity is stagnating and economic opportunities are still concentrated in a few places and limited to a few activities and firms. Today's global production revolution offers a window of opportunity for Chile to "update" its growth model to become more inclusive and sustainable. The Production Transformation Policy Review of Chile (PTPR) uses a forward-looking framework to assess the country readiness to embrace change, with perspectives on solar energy, mining and agro-food, and identifies priorities for future reforms. This review is the result of government-business dialogue and rigorous analysis. It benefitted from peer learning from Sweden, Germany and the Emilia Romagna Region in Italy through the OECD Initiative for Policy Dialogue on Global Value Chains, Production Transformation and Development.
Contents: (1) February 27, 2010, Earthquake: Current Conditions; Chilean Government Response; (2) Political and Economic Background: Independence through Allende; Pinochet Era; Return to Democracy; (3) Recent Political and Economic Developments: Bachelet Administration: Education Demonstrations; Mapuche Activism; Loss of Legislative Control; Global Financial Crisis; 2009 Presidential and Legislative Elections: Results; Prospects for the Piñera Administration; Human Rights; Energy Challenges; (4) Chile-U.S. Relations: U.S. Assistance: Free Trade Agreement; Regional Leadership; Narcotics and Human Trafficking. Charts and tables.