Has the Chilean Neo-Liberal Experiment Run Out of Fuel? A View on Specialisation, Technological Gaps and Catching-Up

Due to an extraordinary growth performance during the last two decades the Chilean neo-liberal model of development, based on the exploitation of the country’s static comparative advantages, has turned into a benchmark for most developing countries. The aim of this paper is to discuss the long term sustainability of the Chilean neo-liberal model of development. We present new empirical results obtained by using CAN2000 as well as input-output analysis that describe the Chilean model of development during the period 1986-1998. On the basis of these stylised facts, a simple ricardian-evolutionary model is developed in order to offer an interpretative framework to discuss the conditions under which Chile could maintain the current catching-up process in the long run. The main conclusion is that, with the recent ceasing of the push effects of the neo-liberal policies, it is unlikely that an increase of the export volume, given its structural characteristics, will be sufficient to this end. Indeed, an increase of the country’s sectoral industrial interdependence and an improvement of its international specialisation pattern towards goods with higher technological content and higher income elasticity of world demand are necessary conditions for maintaining the current catching-up process in the long run.