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Market Reforms and Efficiency Gains in Chile

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  • Raphael Bergoeing
  • Andrés Hernando
  • Andrea Repetto

Abstract

Starting in the mid 1970s, Chile implemented a deep and comprehensive set of structural market reforms. In spite of the wide agreement there is with respect to the expected benefits these reforms should have on growth, little evidence has been provided to empirically establish and to quantify this connection. Using plant-level data on Chilean manufacturing firms for the 1980-2001 period, we provide such evidence. In particular, we estimate disaggregate total factor productivity (TFP) and decompose its dynamics into production reallocation and within plant efficiency changes to study aggregate efficiency, a fundamental source of aggregate growth. We find that during the 1990s, when most reforms had already been fully implemented, both the level and dispersion of TFP grew steadily. These efficiency gains were explained in equal proportions by within plant changes and by the net entry of new and more productive economic units. The reallocation among incumbent plants did not contribute significantly to the enhancement of efficiency, however. Finally, we also show that within-plant efficiency gains were the largest among firms producing traded goods, and among firms that were more likely to face binding liquidity constraints. Thus, in Chile, the adoption of better technologies and production processes, fostered by broader foreign exposure and a superior access to external finance, seem to have accounted for the observed improvement in manufacturing performance.

Suggested Citation

  • Raphael Bergoeing & Andrés Hernando & Andrea Repetto, 2005. "Market Reforms and Efficiency Gains in Chile," Documentos de Trabajo 207, Centro de Economía Aplicada, Universidad de Chile.
  • Handle: RePEc:edj:ceauch:207
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    Cited by:

    1. Raphael Bergoeing & Andrea Repetto, 2006. "Micro Efficiency and Aggregate Growth in Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 169-192.
    2. Benavente, Jose Miguel & Zuniga, Pluvia, 2021. "How does market competition affect firm innovation incentives in emerging countries? Evidence from Latin American firms," MERIT Working Papers 2021-024, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Maria Bas & Ivan Ledezma, 2008. "Trade integration and within-plant productivity evolution in Chile," PSE Working Papers halshs-00588309, HAL.
    4. Benavente, José Miguel & Zuñiga, Pluvia, 2022. "How Does Market Competition Affect Firm Innovation Incentives in Emerging Countries? Evidence from Chile and Colombia," IDB Publications (Working Papers) 12198, Inter-American Development Bank.
    5. Yoshimichi Murakami, 2021. "Trade liberalization and wage inequality: Evidence from Chile," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(3), pages 407-438, April.
    6. Maria Bas & Ivan Ledezma, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," CESifo Working Paper Series 2077, CESifo.
    7. Bergoeing, Raphael & Micco, Alejandro & Repetto, Andrea, 2011. "Dissecting the Chilean export boom," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    8. Roman Fossati & Heiko Rachinger, 2021. "Total Factor Productivity: Exploring firms’ dynamics and heterogeneity over the business cycle," Asociación Argentina de Economía Política: Working Papers 4471, Asociación Argentina de Economía Política.
    9. Maria Bas & Ivan Ledezma, 2008. "Trade liberalization and heterogeneous within-firm productivity improvements," PSE Working Papers halshs-00590303, HAL.
    10. Ezra Oberfield, 2013. "Productivity and Misallocation During a Crisis: Evidence from the Chilean Crisis of 1982," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 100-119, January.
    11. Maria Bas & Ivan Ledezma, 2010. "Trade integration and within-plant productivity evolution in Chile," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(1), pages 113-146, April.
    12. Klaus Schmidt-Hebbel, 2006. "Chile's Economic Growth," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 5-48.
    13. repec:ucp:ecdecc:v:58:y:2010:i:3:p:537-561 is not listed on IDEAS
    14. Stefania Lovo & Michael Gasiorek & Richard Tol, 2014. "Investment in second-hand capital goods and energy intensity," GRI Working Papers 163, Grantham Research Institute on Climate Change and the Environment.
    15. Garrido, Nicolás & Aroca, Patricio, 2017. "Sectoral breakdown of total factor productivity in Chile, 1996-2010," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    16. repec:dau:papers:123456789/6916 is not listed on IDEAS
    17. Sebastián Vergara & Roberto Álvarez, 2008. "Exit in Developing Countries: Economic Reforms and Plant Heterogeneity," Working Papers Central Bank of Chile 506, Central Bank of Chile.
    18. Gustavo González, 2022. "Commodity price shocks, factor utilization, and productivity dynamics," Working Papers Central Bank of Chile 939, Central Bank of Chile.
    19. Roberto Álvarez & Álvaro García & Pablo García, 2008. "Energy Costs and Productivity in Chilean Manufacturing Industry," Working Papers Central Bank of Chile 482, Central Bank of Chile.

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    More about this item

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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