The Structure of the Economy

The Structure of the Economy

A World Bank study shows that after the trade liberalization of the 1970s, Chile experienced a substantial increase in productivity. This study also shows that in the 1987-91 period, Chile's productivity increased much more than that of any other country in Latin America. Chile's national accounts for 1989-91 show a number of interesting features. First, the share of agriculture, livestock, and forestry in GDP decreased during these three years from 8.1 percent to 7.9 percent. This short-term trend, however, was somewhat misleading. In 1971 the share of GDP generated by agriculture, livestock, and forestry had been 7.4 percent. From a historical perspective, the increase in the relative importance of the primary sector in a twenty-year span--from 7.4 percent to 7.9 percent of GDP--was somewhat of an anomaly. A well-documented trend is that in the vast majority of countries, as income and output expand and national economies become more developed, this sector generates a smaller share of GDP. In the case of Chile, the absence of this phenomenon can be explained by the drastic structural reforms implemented in the second half of the 1970s and in the 1980s. An important consequence of the market-oriented reforms of the Pinochet government was the elimination of discrimination against export agriculture that had characterized the Chilean economy during the decades of importsubstitution industrialization. The level of productivity of the agricultural sector (measured as crop yields) had increased significantly by the early 1990s.

A second important feature of Chile's national accounts in 1989-91 is that the manufacturing sector represented approximately 21 percent of GDP for the period. This was significantly lower than this sector's share of total output in 1969-70, when it was almost 25 percent. The reduced participation of manufacturing also reflected the structural reforms of the 1970s and 1980s. Those policies had eliminated the protection walls that had artificially encouraged Chile's industrial sector during the 1960s.

The share of mining in GDP remained roughly constant from 1967 to 1992. However, the composition of mining production changed substantially; in particular, there was a drop in the importance of copper mining. Also, construction's share of GDP shrank from 7.7 percent of GDP in 1970 to 6.0 percent in 1992. During the same period, the share of services increased from 26 percent to 29.1 percent. Within this sector, a particularly significant increase occurred in the financial area.

http://www.heritage.org/international-economies/report/how-chile-successfully-transformed-its-economy
https://en.wikipedia.org/wiki/Chile


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