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Trade Reforms and Manufacturing Industry in Chile

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  • Roberto Alvarez
  • Rodrigo Fuentes

Abstract

The Chilean economy underwent a deep structural change in the mid-seventies, through several economic reforms. Among these, the most impressive one was trade liberalization. This process caused a string of bankruptcies in the manufacturing industry and a reduction in the share of this sector in GDP, which some authors have used to imply that Chile has become a less industrialized economy. This paper describes the main policy changes that are relevant to understand the evolution of the manufacturing industry in Chile after the reforms, and analyzes the evolution of productivity using plant-level data. Our findings challenge the hypothesis that trade liberalization stifled the manufacturing sector and pushed the economy toward exporting raw materials. Also, our results show that the Chilean industry, after these economic reforms, became more efficient and competitive.

Suggested Citation

  • Roberto Alvarez & Rodrigo Fuentes, 2003. "Trade Reforms and Manufacturing Industry in Chile," Working Papers Central Bank of Chile 210, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:210
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    References listed on IDEAS

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    3. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 245-276.
    4. Jere H. Behrman, 1976. "Appendices to "Foreign Trade Regimes and Economic Development: Chile"," NBER Chapters,in: Foreign Trade Regimes and Economic Development: Chile, pages 313-390 National Bureau of Economic Research, Inc.
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    6. Liu, Lili, 1993. "Entry-exit, learning, and productivity change Evidence from Chile," Journal of Development Economics, Elsevier, vol. 42(2), pages 217-242, December.
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    8. Rodrik, Rani, 1995. "Trade and industrial policy reform," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 45, pages 2925-2982 Elsevier.
    9. Tybout, James & de Melo, Jamie & Corbo, Vittorio, 1991. "The effects of trade reforms on scale and technical efficiency : New evidence from Chile," Journal of International Economics, Elsevier, vol. 31(3-4), pages 231-250, November.
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    12. Rodrigo Fuentes, 1995. "Openness and economic efficiency: evidence from the Chilean manufacturing industry," Estudios de Economia, University of Chile, Department of Economics, vol. 22(2 Year 19), pages 357-387, December.
    13. Sangho Kim & Gwangho Han, 2001. "A Decomposition of Total Factor Productivity Growth in Korean Manufacturing Industries: A Stochastic Frontier Approach," Journal of Productivity Analysis, Springer, vol. 16(3), pages 269-281, November.
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    Cited by:

    1. Raphael Bergoeing Vela & Andrés Hernando & Andrea Repetto, 2010. "Market Reforms and Efficiency Gains in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 37(2 Year 20), pages 217-242, December.

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