The evolution of industrial development in Costa Rica: Political and institutional constraints to full utilization of factors of productio

This study traces the emergence of industrial activity of Costa Rica from colonial times to the present. It demonstrates the ways in which policies have changed in response to changing times. The effects of government policies at various stages are documented, and the argument is made that these policies have had major effects for better or worse on the development of the whole economy and particularly industry. Emphasis is given to the most recent period of the last three decades.;The premise is that high levels of un- and underemployment, the slow rate of labor absorption in manufacturing, high capital/labor ratios and low levels of capacity utilization in manufacturing and other sectors, and inequalities in income distribution in less developed countries, mainly in Latin America, are a result of internal political-institutional, historical, economic-administrative, technological factors, as well as government intervention and planning, and not merely an outcome of external socio-economic dependency on developed countries.;Given the increasing gap between employment needs and financial resources available for industrial investment and basic public services in less developed countries, institutional reforms and planning for the achievement of genuine full employment have reappeared as the most decisive mechanisms by which industry can contribute to overall social and economic development. Thus, the specific objectives of this research were to assess the effects on employment of the industrial sector in Costa Rica and to identify and study the institutional constraints which determine the pattern of industrialization and misallocation of capital and labor resources.;This study uses various objective and subjective evidence on appropriate factor proportions, capital utilization, and comparative advantage. The theoretical basis is positive/normative economics to define what an economy should achieve in terms of market organization, employment generation, industrial development pattern and other social goals within a free-market system. This framework is then used to compare strategies in both developed and less developed countries and concludes that factor utilization in Costa Rica has been distorted by misguided public policies which have made abundant labor expensive and scarce capital cheap.