Microeconomic flexibility in Latin America
By: [by] Ricardo J. Caballero, Eduardo M.R.A. Engel [and] Alejandro Micco
Contributors: Engel, Eduardo; Micco, Alejandro; Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 04-09; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 04-09.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Number of pages: 33
Description: We characterize the degree of microeconomic inflexibility in several Latin American economies and find that Brazil, Chile and Colombia are more flexible than Mexico and Venezuela. The difference in flexibility among these economies is mainly explained by the behavior of large establishments, which adjust more promptly in the more flexible economies, especially when accumulated shocks are substantial. We also study the path of flexibility in Chile and show that it declined in the aftermath of the Asian crisis. This decline can account for a substantial fraction of the large decline in TFP-growth in Chile since 1997 (from 3.1 percent per year for the preceding decade, to about 0.3 percent after that). Moreover, if it were to persist, it could permanently shave off almost half of a percent from Chile's structural rate of growth. Keywords: Microeconomic rigidities, creative-destruction, job flows, restructuring and reallocation, productivity growth. JEL Classifications: E2, J2, J6.
Notes: "March 2004."

Includes bibliographical references (p. 19-20).

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