Commodity price shocks and poverty reduction in Chile

Roberto Álvarez; Álvaro García-Marín; Sebastián Ilabaca

doi:10.1016/j.resourpol.2018.04.004

Commodity price shocks and poverty reduction in Chile

Roberto Álvarez^*, Álvaro García-Marín, Sebastián Ilabaca

^*Corresponding author for this work

Facultad de Ciencias Económicas y Empresariales

Research output: Contribution to journal › Article › peer-review

22 Scopus citations

Abstract

This paper examines the local economic impact of large increases in metal-mining product prices on poverty in Chile. Using household data from 1998 to 2013 and exploiting differences in municipalities’ exposure to price changes, we provide evidence of a reduction in poverty rates following the positive terms of trade shock of 2003. According to our estimations, the increase in mineral prices experienced between 2003 and 2009 reduced poverty by more than 2% points in municipalities relatively exposed to the commodity boom – with at least 7% of employment in the metal-mining sector – in comparison to municipalities with no exposure to the boom. In addition, we explore some of the mechanisms explaining the reduction in poverty. We find significant effect of higher products prices on wages and employment, especially for unskilled workers and for workers employed in metal-mining industries.

Original language	English
Article number	101177
Journal	Resources Policy
Volume	70
DOIs	https://doi.org/10.1016/j.resourpol.2018.04.004
State	Published - Mar 2021

Bibliographical note

Funding Information:
We would like to thank Claudio Bravo-Ortega, Paola Bordón, Dante Contreras, Rodrigo Fuentes, Joao Paulo Pessoa, Jaime Ruiz-Tagle, and Rodrigo Wagner, as well as seminar participants at the 2016 TIGN Conference, 2016 Econometric Society European Meeting, SECHI Annual Conference, and University of Chile for valuable comments and suggestions. Alvaro Garcia gratefully acknowledge research support from CONICYT-Chile through project Fondecyt Iniciación en Investigación 11150432.

Publisher Copyright:
© 2018 Elsevier Ltd

Keywords

Trade liberalization
Dutch disease
Resource
Consequences

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.resourpol.2018.04.004

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title = "Commodity price shocks and poverty reduction in Chile",

abstract = "This paper examines the local economic impact of large increases in metal-mining product prices on poverty in Chile. Using household data from 1998 to 2013 and exploiting differences in municipalities{\textquoteright} exposure to price changes, we provide evidence of a reduction in poverty rates following the positive terms of trade shock of 2003. According to our estimations, the increase in mineral prices experienced between 2003 and 2009 reduced poverty by more than 2% points in municipalities relatively exposed to the commodity boom – with at least 7% of employment in the metal-mining sector – in comparison to municipalities with no exposure to the boom. In addition, we explore some of the mechanisms explaining the reduction in poverty. We find significant effect of higher products prices on wages and employment, especially for unskilled workers and for workers employed in metal-mining industries.",

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author = "Roberto {\'A}lvarez and {\'A}lvaro Garc{\'i}a-Mar{\'i}n and Sebasti{\'a}n Ilabaca",

note = "Funding Information: We would like to thank Claudio Bravo-Ortega, Paola Bord{\'o}n, Dante Contreras, Rodrigo Fuentes, Joao Paulo Pessoa, Jaime Ruiz-Tagle, and Rodrigo Wagner, as well as seminar participants at the 2016 TIGN Conference, 2016 Econometric Society European Meeting, SECHI Annual Conference, and University of Chile for valuable comments and suggestions. Alvaro Garcia gratefully acknowledge research support from CONICYT-Chile through project Fondecyt Iniciaci{\'o}n en Investigaci{\'o}n 11150432. Publisher Copyright: {\textcopyright} 2018 Elsevier Ltd",

year = "2021",

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doi = "10.1016/j.resourpol.2018.04.004",

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AU - Álvarez, Roberto

AU - García-Marín, Álvaro

AU - Ilabaca, Sebastián

N1 - Funding Information: We would like to thank Claudio Bravo-Ortega, Paola Bordón, Dante Contreras, Rodrigo Fuentes, Joao Paulo Pessoa, Jaime Ruiz-Tagle, and Rodrigo Wagner, as well as seminar participants at the 2016 TIGN Conference, 2016 Econometric Society European Meeting, SECHI Annual Conference, and University of Chile for valuable comments and suggestions. Alvaro Garcia gratefully acknowledge research support from CONICYT-Chile through project Fondecyt Iniciación en Investigación 11150432. Publisher Copyright: © 2018 Elsevier Ltd

PY - 2021/3

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N2 - This paper examines the local economic impact of large increases in metal-mining product prices on poverty in Chile. Using household data from 1998 to 2013 and exploiting differences in municipalities’ exposure to price changes, we provide evidence of a reduction in poverty rates following the positive terms of trade shock of 2003. According to our estimations, the increase in mineral prices experienced between 2003 and 2009 reduced poverty by more than 2% points in municipalities relatively exposed to the commodity boom – with at least 7% of employment in the metal-mining sector – in comparison to municipalities with no exposure to the boom. In addition, we explore some of the mechanisms explaining the reduction in poverty. We find significant effect of higher products prices on wages and employment, especially for unskilled workers and for workers employed in metal-mining industries.

AB - This paper examines the local economic impact of large increases in metal-mining product prices on poverty in Chile. Using household data from 1998 to 2013 and exploiting differences in municipalities’ exposure to price changes, we provide evidence of a reduction in poverty rates following the positive terms of trade shock of 2003. According to our estimations, the increase in mineral prices experienced between 2003 and 2009 reduced poverty by more than 2% points in municipalities relatively exposed to the commodity boom – with at least 7% of employment in the metal-mining sector – in comparison to municipalities with no exposure to the boom. In addition, we explore some of the mechanisms explaining the reduction in poverty. We find significant effect of higher products prices on wages and employment, especially for unskilled workers and for workers employed in metal-mining industries.

KW - Trade liberalization

KW - Dutch disease

KW - Resource

KW - Consequences

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DO - 10.1016/j.resourpol.2018.04.004

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VL - 70

JO - Resources Policy

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ER -

Commodity price shocks and poverty reduction in Chile

Abstract

Bibliographical note

Keywords

UN SDGs

Access to Document

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