Economic Growth in Chile, Uruguay, Costa Rica, Panama, Dominican Republic, and Ecuador: A Comparative Analysis of Latin American Democracies

Abstract

This study examined the influence of foreign direct investment, education expenditure, income inequality, trade openness, and government effectiveness on GDP growth rates across six Latin American democracies (Chile, Uruguay, Costa Rica, Panama, Dominican Republic, and Ecuador) from 2010 to 2019. Using a statistical approach including hierarchical linear modeling, generalized method of moments estimation, and quantile regression analysis, the research explored how these factors affected economic growth across different institutional frameworks. Two data validation procedures ensured the reliability of the findings, while three statistical methods verified the study's hypothesis. The findings showed that while all variables significantly impacted growth, their effects varied in magnitude and direction across countries, reflecting differences in institutional frameworks and economic policies. Trade openness and foreign direct investment demonstrated the strongest positive influence on growth across all nations, though their effectiveness was moderated by institutional quality. Income inequality showed a non-linear relationship with growth, varying significantly across different growth quantiles. The study contributed to understanding growth determinants in Latin American democracies by showing more complex relationships than previously documented, particularly regarding the role of institutions in mediating policy effectiveness. 

Received: 4 August 2024 / Accepted: 29 December 2024 / Published: 11 January 2025