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Chile's export diversification since 1960: A free market miracle or mirage?

Amir Lebdioui

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Conventional wisdom has proclaimed Chile's recent economic development a 'free market miracle'. In an examination of Chile's export diversification experience, this article departs from that view. By analysing the dynamics underlying the emergence of the salmon, fruit, forestry and wine sectors in Chile's export basket since the 1960s, the study sheds light on the crucial role of industrial policy in the process of capability accumulation that shapes new industries. The article undertakes a qualitative historical analysis of the scope and nature of policy interventions in each of the four sectors and conducts a quantitative policy evaluation using the difference-in-difference method. It finds that public institutions are essential in overcoming market failures inhibiting the emergence of new industries. Specifically, it shows that the government has a key role to play as a catalyst of human capital accumulation, as a venture capitalist, in trade promotion, and in ensuring 'national' sector reputation through a strong regulatory and quality control role. By elaborating on the dynamic process of structural transformation and capability accumulation, this article contributes to theoretical debates on the role of vertical policies in the emergence of new competitive sectors, and debates relating to static versus dynamic approaches to comparative advantage.

Keywords: Chile; exports; forestry; wine; salmon; fruit; industrial policy; difference in difference method (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019-11-01
New Economics Papers: this item is included in nep-his and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Published in Development and Change, 1, November, 2019, 50(6), pp. 1624-1663. ISSN: 0012-155X

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