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Chile's export diversification since 1960: A free market miracle or mirage?

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  • Lebdioui, Amir

Abstract

Conventional wisdom has proclaimed Chile's recent economic development a 'free market miracle'. In an examination of Chile's export diversification experience, this article departs from that view. By analysing the dynamics underlying the emergence of the salmon, fruit, forestry and wine sectors in Chile's export basket since the 1960s, the study sheds light on the crucial role of industrial policy in the process of capability accumulation that shapes new industries. The article undertakes a qualitative historical analysis of the scope and nature of policy interventions in each of the four sectors and conducts a quantitative policy evaluation using the difference-in-difference method. It finds that public institutions are essential in overcoming market failures inhibiting the emergence of new industries. Specifically, it shows that the government has a key role to play as a catalyst of human capital accumulation, as a venture capitalist, in trade promotion, and in ensuring 'national' sector reputation through a strong regulatory and quality control role. By elaborating on the dynamic process of structural transformation and capability accumulation, this article contributes to theoretical debates on the role of vertical policies in the emergence of new competitive sectors, and debates relating to static versus dynamic approaches to comparative advantage.

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  • Lebdioui, Amir, 2019. "Chile's export diversification since 1960: A free market miracle or mirage?," LSE Research Online Documents on Economics 101885, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:101885
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    File URL: http://eprints.lse.ac.uk/101885/
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    Cited by:

    1. Muhammad Zeshan, 2023. "Trade, Industry and Competition in Pakistan," PIDE-Working Papers 2023:15, Pakistan Institute of Development Economics.
    2. Amir Lebdioui & Keun Lee & Carlo Pietrobelli, 2021. "Local-foreign technology interface, resource-based development, and industrial policy: how Chile and Malaysia are escaping the middle-income trap," The Journal of Technology Transfer, Springer, vol. 46(3), pages 660-685, June.
    3. Abdullah, Sarwar & Gray, Tim, 2022. "Political constraints on economic diversification in the Kurdistan Region of Iraq," Energy Policy, Elsevier, vol. 171(C).
    4. Lebdioui, Amir, 2021. "The Multidimensional Indicator of Extractives-based Development (MINDEX): A new approach to measuring resource wealth and dependence," World Development, Elsevier, vol. 147(C).
    5. Aistleitner, Matthias & Gräbner, Claudius & Hornykewycz, Anna, 2021. "Theory and empirics of capability accumulation: Implications for macroeconomic modeling," Research Policy, Elsevier, vol. 50(6).
    6. Lebdioui, Amir, 2022. "Nature-inspired innovation policy: Biomimicry as a pathway to leverage biodiversity for economic development," Ecological Economics, Elsevier, vol. 202(C).
    7. Rogneda I. Vasilyeva & Valentin A. Voitenkov & Alina R. Urazbaeva, 2022. "Modelling of the Influence of Regional Determinants on Export Diversification in Russia," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 21(1), pages 79-100.
    8. Palma, J. G., 2019. "The Chilean economy since the return to democracy in 1990. On how to get an emerging economy growing, and then sink slowly into the quicksand of a “middle-income trap”," Cambridge Working Papers in Economics 1991, Faculty of Economics, University of Cambridge.
    9. Matthias Aistleitner & Stephan Puehringer, 2020. "Exploring the trade (policy) narratives in economic elite discourse," ICAE Working Papers 110, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    10. Guendalina Anzolin & Amir Lebdioui, 2021. "Three Dimensions of Green Industrial Policy in the Context of Climate Change and Sustainable Development," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(2), pages 371-405, April.
    11. Roberto Alvarez & Eugenia Andreasen, 2024. "Exploring the Effects of FTAs on Chilean Exports: Heterogeneous responses and Financial Constraints," Working Papers wp555, University of Chile, Department of Economics.

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    More about this item

    Keywords

    Chile; exports; forestry; wine; salmon; fruit; industrial policy; difference in difference method;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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