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Reallocation and Productivity during Commodity Cycles

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  • Heresi, Rodrigo

Abstract

I study the firm-level dynamic response of a commodity-exporting economy to global cycles in commodity prices. To do so, I develop a heterogeneous-firms model that endogenizes declines in aggregate productivity through reallocation towards less productive firms. Within a given sector, commodity booms reallocate market share away from exporters because of currency appreciation and away from capital-intensive firms because of the increase in capital cost. I provide empirical evidence for these channels using microdata for Chile, the worlds largest copper producer. When fed with the commodity super-cycle of 2003-2012, the calibrated model generates about 50% of the observed productivity decline.

Suggested Citation

  • Heresi, Rodrigo, 2021. "Reallocation and Productivity during Commodity Cycles," IDB Publications (Working Papers) 11175, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:11175
    DOI: http://dx.doi.org/10.18235/0003203
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    More about this item

    Keywords

    Productivity; Resource booms; Open economy macroeconomics;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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