Patterns of Specialization and Economic Growth in Chile by Sector

Abstract

This paper discusses the implications on sector growth within the context of a specialization model based on factor endowment. The empirical literature is examined, which reveals that the only way for the economy to alter its specialization patterns toward the production of goods that are characteristic of higher development is to change its endowment of resources accordingly. For that, investment in both human and physical capital must be increased. The paper also studies growth patterns by sectors and finds a high degree of heterogeneity. More aggregate results, separating between tradables and nontradables over the years of fast economic growth (1986-1998), show that the contribution of TFP is as important as the accumulation of capital and labor in explaining the years of fast growth of the nontradable sector (1987-1991), while in 1992-1998, this sector’s expansion was due only to factor accumulation. On the contrary, the tradable sector increased thanks to the accumulation of capital and labor, with almost no increase in productivity in 1987-1991, while TFP was significant in explaining growth between 1992 and 1998.