Local Impacts of Economic Liberalization: Evidence from the Chilean Agricultural Sector

What are the local impacts of an economic liberalization? We try to answer this question exploiting the fact that different counties had different effective rates of protection before the trade liberalization process - that made tariffs low and uniform- started. Using a novel dataset from agricultural censuses over a period of 50 years we find that agricultural output growth and specialization increased by more in counties that were initially more unprotected by the tariff structure, while average plot size and land concentration decreased after this process in those counties. Inversely, we find that agricultural output growth decrease for initially more protected counties. Effects are both economically and statistically significant and imply relevant resource reallocation processes within agricultural production, which we describe in terms of changes in inputs demand patterns, and changes in productivity.