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Latin American Economic Development PDF

357 Pages·2019·33.813 MB·English
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i Latin American Economic Development Latin America is one of the most intriguing parts of the world. The region’s illustrious history, culture, and geography are famous internationally, but in terms of economics, Latin America has been generally associated with problems. For many, the combination of a resource- rich region and poor economic conditions has been a puzzle. This extensively revised and updated third edition of Latin American Economic Development continues to provide the most up-t o- date exploration of why the continent can be considered to have underperformed, how the various Latin American economies function, and the future prospects for the region. The book addresses the economic problems of Latin America theme by theme. Changes and new features in this new edition include: • a new chapter on economic growth that reflects the new understanding of slow growth in the region; • two new appendices on basic microeconomics and macroeconomics; • expanded coverage on new commodities such as lithium and quinoa; • a number of new boxes and updates to existing boxes. The book provides a comprehensive text for undergraduate economics courses on Latin America and is also suitable for use by students in other disciplines looking for a wide- ranging guide to the region. This book will continue to be an invaluable resource for undergraduates looking at Latin American economics, growth, and development. Javier A. Reyes is Professor of Economics and the Milan Puskar Dean of the John Chambers College of Business and Economics, University of West Virginia, US. W. Charles Sawyer is the Hal Wright Professor of Latin American Economics, Texas Christian University, US. ii Routledge Textbooks in Development Economics African Economic Development Steven Langdon, Archibald R. M. Ritter and Yiagadeesen Samy Development Economics A Critical Introduction Shahrukh Khan Latin American Economic Development, 3e Javier A. Reyes and W. Charles Sawyer For more information about this series, please visit: www.routledge.com/ Routledge- Textbooks- in- Development- Economics/ book- series/ RTDE iii Latin American Economic Development Third edition Javier A. Reyes and W. Charles Sawyer iv Third edition published 2020 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2020 Javier A. Reyes and W. Charles Sawyer The right of Javier A. Reyes and W. Charles Sawyer to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. First edition published by Routledge 2011 Second edition published by Routledge 2016 British Library Cataloguing- in- Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging- in- Publication Data A catalog record has been requested for this book ISBN: 978- 1- 138- 38840- 6 (hbk) ISBN: 978- 1- 138- 38841- 3 (pbk) ISBN: 978- 0- 429- 42556- 1 (ebk) Typeset in Times New Roman by Newgen Publishing UK v Contents List of figures vii List of tables ix List of boxes xi Acknowledgments xiii Preface xv 1 Latin America and the world economy 1 2 Latin American economic history 16 3 Economic growth and Latin America 47 4 Limits to growth in Latin America 69 5 Growth and the environment in Latin America 91 6 Latin America and primary commodities 124 7 Import substitution in Latin America 146 8 Latin American trade policy 169 9 Exchange- rate policy 204 10 Financing current- account deficits 228 11 Macroeconomic policy in Latin America 247 12 Macroeconomic stability 268 vi vi Contents 13 Poverty and inequality 287 14 Economic policy debates in Latin America 306 Index 321 vii Figures 1.1 Actual vs. potential changes in GDP per capita in Latin America (constant 2005 US dollars) 11 3.1 The production function and changes in labor 57 3.2 The production function and changes in capital or technology 59 5.1 Equilibrium price and output with no externalities 92 5.2 Equilibrium price and output in the presence of negative externalities 93 5.3 The marginal cost and marginal benefit of pollution 97 5.4 The environmental Kuznets curve 112 5.5 Demand curve 116 5.6 Supply curve 117 5.7 Interaction demand and supply 119 5.8 Inelastic demand and supply 120 6.1 Equilibrium price and output for a commodity 127 6.2 Equilibrium price and output with changes in demand 129 6.3 Equilibrium price and output with changes in supply 130 6.4 Changes in supply and demand in commodity markets 133 8.1 Equilibrium price and output in autarky 179 8.2 Changes in welfare resulting from trade 180 8.3 The effects of a tariff 180 8.4 The effects of a quota 185 9.1 The demand and supply of foreign exchange 210 9.2 Intervention in the foreign- exchange market 212 10.1 Flows of FDI into Latin America 230 10.2 Flows of portfolio capital into Latin America 232 10.3 Flows of ODA into Latin America 234 10.4 Latin American debt 238 10.5 Debt service in Latin America 240 10.6 The effects of IMF austerity programs 242 11.1 The equilibrium price level and real GDP 248 11.2 The price level and changes in aggregate demand 257 11.3 Changes in aggregate demand and changes in the price level and real GDP 258 11.4 The effects of changes in inflationary expectations 260 11.5 Long- run increases in the price level 261 11.6 Long-run aggregate supply 262 11.7 Macroeconomic equilibrium 264 viii viii Figures 11.8 An increase in aggregate demand 264 11.9 A decrease in aggregate supply 265 12.1 Macroeconomic effects of a commodity price shock 270 12.2 The price of oil (per barrel) 273 12.3 Macroeconomic effects of an oil shock 275 12.4 Policy responses to an oil shock 276 12.5 Maintaining a fixed exchange rate 277 12.6 Macroeconomic effects of an exchange- rate shock 278 12.7 Macroeconomic effects of oil shocks, inflationary expectations and current- account deficits 279 12.8 The J- curve 280 12.9 An exchange- rate shock combined with an austerity program 281 12.10 The effects of falling inflationary expectations 283 ix Tables 1.1 Population, GDP, and GDP per capita for Latin America, low- , middle- , and high- income countries, and the world (2017) 3 1.2 The Human Development Index in Latin America (2017) 5 1.3 Latin America and international trade (2017) 7 1.4 Capital flows in Latin America (2017) 8 1.5 The economic relationship between Latin America and the US (US$ billions) 12 3.1 Property rights in Latin America 49 3.2 Intellectual- property protection in Latin America 51 3.3 The rule of law in Latin America 53 3.4 Judicial independence in Latin America 55 3.5 The labor force in Latin America (millions of workers) 61 3.6 The capital– labor ratio and GDP per capita in Latin America 62 3.7 Educational attainment in Latin America 64 4.1 Average economic growth in Latin America, 1960– 2017 71 4.2 Growth accounting gaps between Latin America and the world economies 71 4.3 FDI and savings in Latin America 73 4.4 Infrastructure quality in Latin America (2017– 2018) 75 4.5 Road quality and road fatalities in Latin America 76 4.6 Starting a business in Latin America (2018) 79 4.7 Business taxes in Latin America (2018) 79 4.8 Labor-m arket flexibility in Latin America 81 4.9 Measures of institutional quality in Latin America 84 5.1 Natural disasters in Latin America 95 5.2 Major natural disasters in Latin America, 1974– 2003 95 5.3 Access to clean water and sanitation in Latin America 102 5.4 Industrial water pollution in Latin America 104 5.5 Urban air pollution in Latin America 105 5.6 Urbanization in Latin America 106 5.7 Deforestation in Latin America 107 6.1 Commodity booms in Latin America 125 6.2 World commodity prices, 2006–2013 126 6.3 Commodities’ share of exports and GDP in Latin America (2017) 135 8.1 Trade based on absolute advantage 170 8.2 Trade based on comparative advantage 171 8.3 Capital- to- labor ratio in Latin America 175

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