Abstract
Commenting on economic performance during the 1970s and 1980s, some economists have argued that ‘savings are insufficient’. Of course, the same could have been said — and it was — in relation to the 1950s or 1960s. This is a sweeping statement and before accepting it as true, and as a fundamental motivation for policy, it needs to be, if not qualified, at least carefully examined. It is often accepted that the incremental capital output ratio (ICOR) for the Chilean economy can be as high as 3 or 4, meaning that each 1 per cent of increase in GDP would require a rate of investment equal to 3 or 4 per cent of output. However, this assumes: (a) that actual installed capacity is being fully utilised, that is it ignores that some capacity in manufacturing and in other activities remains idle for most of the time; (b) that the ICOR is constant, which means that there is no room for diminishing it by using capital and other resources more effectively; and (c) that the production function is rigid, that is possibilities of substitution of other resources for capital are very limited. Several studies have pointed out that these assumptions are unrealistic, and that traditionally the level of capacity utilisation in Chilean industry has tended to be quite low. It has been suggested that some simple measures, such as the adoption of better methods and new technologies, overcoming bottlenecks in input supplies, or removing the institutional and legal obstacles to second and third shifts in the labour market, can induce a significantly positive impact on output and employment, without having to increase savings and investment substantially (Instituto de Economía, 1963; Behrman, 1973a; Ramos, 1975).
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Author information
Authors and Affiliations
Copyright information
© 1993 David E. Hojman
About this chapter
Cite this chapter
Hojman, D.E. (1993). Savings, Investment, Growth and the Debt. In: Chile. Palgrave Macmillan, London. https://doi.org/10.1057/9780230376656_12
Download citation
DOI: https://doi.org/10.1057/9780230376656_12
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-39015-1
Online ISBN: 978-0-230-37665-6
eBook Packages: Palgrave Political & Intern. Studies CollectionPolitical Science and International Studies (R0)