Commodity price shocks, factor utilization, and productivity dynamics

Gustavo González

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: I investigate the importance of commodity price shocks on aggregate productivity dynamics. I focus on variable utilization of primary factors as driving mechanism. I exploit variation in product tradability and cost exposure to the copper industry to characterize the responses of manufacturing Chilean firms to copper price shocks. I find that, when copper prices increase, establishments selling non-tradables display higher productivity growth than those selling tradables. At the same time, plants more cost-exposed to the copper industry display lower growth. I develop a multi-sector small open economy model featuring frictions to factor management and variable factor utilization. I quantitatively find that variable utilization can generate a strong positive association between copper price shocks and measured aggregate productivity, as it is observed in Chilean data.

Date: 2022-01
New Economics Papers: this item is included in nep-dge and nep-eff
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:939

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