Long-term Gain, Short-Term Pain: Assessing the Potential Impact of Structural Reforms in Chile
December 29, 2015
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Summary
In this paper, I study the potential economic impact of the 2015-18 structural reform agenda in Chile, using the IMF dynamic general equilibrium model (GIMF). I find that the agenda has the potential to significantly increase Chile’s long-run GDP, although it may have some negative effects in the short term. Ensuring a smooth transition to a higher productive potential depends on three key dimensions: the credibility of the reforms, their effectiveness in closing structural gaps, and their speed of implementation. Badly designed reforms that remove only a very small fraction of the existing structural gaps, at a slow speed, and with little credibility, can greatly reduce the positive impact of the reform agenda on GDP.
Subject: Consumption, Education, Human capital, Infrastructure, Labor, Macrostructural analysis, National accounts, Structural reforms
Keywords: Asia and Pacific, capital factor share parameter, Chilean economy, Consumption, cost of capital, education quality, human capital, Infrastructure, infrastructure network, investment goods, macroeconomic analysis, school voucher system, structural reforms, telecommunication industry, telecommunication infrastructure, utility function, WP
Pages:
35
Volume:
2015
DOI:
Issue:
282
Series:
Working Paper No. 2015/282
Stock No:
WPIEA2015282
ISBN:
9781513537634
ISSN:
1018-5941
