Mining development and macroeconomic spillovers in Chile

• Published in: Resources policy Vol. 70; p. 101217
• Main Author: Medina, Juan Pablo
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01-03-2021; Elsevier Science Ltd
• Subjects: Aggregate data; Data mining; Dutch disease; Economic factors; Effects; Labor market; Literature reviews; Macroeconomic models; Macroeconomic spillovers; Macroeconomics; Measurement; Mining; Mining development; Mining industry; Natural resources; Prices; Production; Production interlinkages; Spillover effect; Structural models; Chile; Mining development; Production interlinkages; Macroeconomic models; Dutch disease; Macroeconomic spillovers
• ISSN: 0301-4207; 1873-7641
• DOI: 10.1016/j.resourpol.2018.06.008

This work analyzes and quantifies how the mining sector affects the other macroeconomic variables in Chile, with special focus on understanding the macroeconomic factors that have helped Chile to avoid the Natural Resource Curse. To do this, we use three complementary strategies. First, we review the related literature and present aggregate statistical data for the mining sector in order to illustrate the significant impact of this sector on the key macroeconomic variables in Chile. Second, using semi-structural econometric evidence, we estimate the macroeconomic effects of changes in copper prices and mining production. Third, we develop a structural macroeconomic model that enables analysis of the macroeconomic effects of mining sector shocks. The results show that the development of the mining sector in Chile has been beneficial to the non-mining GDP, investment, fiscal revenue and labor market. Using the structural model, we also quantify the macroeconomic effects of mining development in Chile during 1996–2005. The structural model also provides a quantification of the role of the fiscal rule and production interlinkages in enhancing these macroeconomic effects. Finally, an extended version of the model, separating mining production into regional zones, confirms the previous results and underscores the difference in production interlinkages across mining regions.
•The estimations quantify and confirm that mining development has not generated a Natural Resource Curse in Chile.•The structural model estimates the contribution of the mining development in several macroeconomic variables.•The role of the fiscal rule, production interlinkages and its regional dimension are analyzed as potential enhancing factors of the macroeconomic benefits of mining development in Chile.