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Cities built on copper – The impact of mining exports, wages and financial liquidity on urban economies in Chile

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  • Rehner, Johannes
  • Rodríguez, Sebastián

Abstract

In small, open, mineral-export based economies, the economic growth of some medium sized cities is linked to cycles of boom and bust of export revenues due to commodity price volatility. We propose to explain urban economic growth in terms of real estate investment and private consumption as a function of commodity exports, wages and financial liquidity by employing “Dutch disease” and the “secondary circuit” of capital as theoretical references. Monthly data (2005–2015) from three mining-related cities are used in order to estimate these effects using linear regression models. Results show some general features like the outstanding influence of mining and other wages rather than export revenues on retail in most cities. Divergent results are observed regarding real estate investment being mining wages, financial liquidity, exports and also loans explanatory factors. Thus it could be shown that the main vehicle for spill-over from mining to urban economies is private household income and its distribution in space. Furthermore by calculating separate models for each city, important differences among contrasting types of cities appear. The importance of discussing the impacts of mining on economic development on a local, rather than on a national scale and of considering wages more systematically in the theoretical discussion of secondary and linkage effects of mining and in the design of public policy on commodity based development is evident.

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  • Rehner, Johannes & Rodríguez, Sebastián, 2021. "Cities built on copper – The impact of mining exports, wages and financial liquidity on urban economies in Chile," Resources Policy, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:jrpoli:v:70:y:2021:i:c:s0301420717303409
    DOI: 10.1016/j.resourpol.2018.05.001
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