Chile’s Economic Growth

Joel CohenVidaur Durazo

History of Economic Growth & Volatility

• 1986-2005– 4.8% GDP per capita Growth• Exceeds world average of 1.4%

– 3.1% Standard Deviation (Low Relative• 1810-2005– 1.7% GDP per capita Growth • With periods of negative growth

– 6.3% Standard Deviation

History of Economic Growth & Volatility

External Economic Shocks

1. WW12. Declining world demand of Chilean nitrate3. Great Depression

- Greatest GDP loss in the world (1930-1932)

History of Economic Growth (Political Explanations)

• Post Great Depression– Import Substitution Strategy based on

government led industrialization strategy. – Strategy peaked in 1970-1973– After 1974 Military Coup, Market based policies,

deregulation– Structural reforms in 1970-80s lead to

macroeconomic stability.

Chilean Economic Growth: International Comparison

World Growth Determinants

Regional & Sector Growth (1960-2005)

Regional Income Convergence

Sector Level TFP Dynamics

Sources of Growth at Economic Sector Level:

World Growth

Estimates for Sources of Chilean Growth

Deep Growth Determinants

• Domestic Policies• Quality of Institutions• International Factors• Geography • Luck

Cyclical Growth

Questions & Concerns