Market Reforms and Efficiency Gains in Chile

Abstract

Starting in the mid 1970s, Chile implemented comprehensive structural market reforms. Using manufacturing plant-level data on Chilean firms for years 1980 to 2001, we estimate the role of reforms on efficiency. We analyze aggregate productivity constructed from micro data to find that in the aftermath of the reforms, efficiency gains were explained by within-plant improvements and by the net entry of new units. We also find that plants producing traded goods and plants facing liquidity constraints experienced the largest efficiency gains. Trade openness and a superior access to external finance seem to have partially accounted for the improvement in manufacturing performance.Estudios de Economía, Vol. 37 -Nº 2 218 restringidas en su liquidez. Así, nuestros resultados sugieren que la apertura comercial y el mejor acceso al financiamiento externo explican en parte el mejor desempeño manufacturero en Chile.Palabras clave: Dinámica de plantas, Productividad, Manufacturas, Chile.JEL Classification: L16, L60, O47, O12.

Trade integration and within-plant productivity evolution in Chile

“…In this case, import competition reduces market shares of domestic firms shrinking the opportunities to exploit scale economies. This possible explanation has also been emphasized by Bergoeing et al (2006) for different production function estimates and data treatment.…”

“…Similar to Bergoeing et al (2006), we identify plants that may face liquidity constraints using as a proxy a loan tax payment at the plant level. In Chile, financial credits are subject to this tax.…”

“…The identification setting has been chosen to allow for a close comparison with previous results obtained by Pavcnik (2002) and Bergoeing et al (2006). 2 Both studies acknowledge the presence of time-varying firm heterogeneity and deal with the effects of trade integration on productivity gains in a similar and comparable identification strategy.…”

“…Even their rise in early 1980s, during the debt crisis, was uniform. This homogeneous tariff reduction is probably the reason why Pavcnik (2002) is constrained to use time dummy indicators and Bergoeing et al (2006) can not get enough variance for their estimates concerning export-oriented industries.…”

“…Chilean trade reforms have been recently revisited by Bergoeing et al (2006). They study the impact of the financial and trade reforms on productivity gains in Chile during a longer period .…”