Abstract
ABSTRACTConventional wisdom has proclaimed Chile's recent economic development a ‘free market miracle’. In an examination of Chile's export diversification experience, this article departs from that view. By analysing the dynamics underlying the emergence of the salmon, fruit, forestry and wine sectors in Chile's export basket since the 1960s, the study sheds light on the crucial role of industrial policy in the process of capability accumulation that shapes new industries. The article undertakes a qualitative historical analysis of the scope and nature of policy interventions in each of the four sectors and conducts a quantitative policy evaluation using the difference‐in‐difference method. It finds that public institutions are essential in overcoming market failures inhibiting the emergence of new industries. Specifically, it shows that the government has a key role to play as a catalyst of human capital accumulation, as a venture capitalist, in trade promotion, and in ensuring ‘national’ sector reputation through a strong regulatory and quality control role. By elaborating on the dynamic process of structural transformation and capability accumulation, this article contributes to theoretical debates on the role of vertical policies in the emergence of new competitive sectors, and debates relating to static versus dynamic approaches to comparative advantage.
Highlights
Several mineral resource rich countries have fallen into commodity dependence by failing to diversify.1 In contrast, Chile, despite the continuing significance of copper
While it can be argued that some sectors such as the wine industry could have developed through market forces alone, it is undeniable that other sectors would not have developed to the same extent without vertical interventions
The comparative advantage that Chile developed in salmon, forestry and fruit production did not rely on natural factors; rather, it has mostly been acquired through technology upgrading, human capital accumulation, export quality control and financial incentives, through state interventions
Summary
By analysing the dynamics underlying the emergence of the salmon, fruit, forestry and wine sectors in Chile’s export basket since the 1960s, the study sheds light on the crucial role of industrial policy in the process of capability accumulation that shapes new industries. It is important to understand the historical evolution of state interventions in Chile in order to understand vertical policies in their context, space constraints mean that this article focuses on the four key sectors that have emerged in Chile’s export basket and does not include a broader review of the history of industrial policy in Chile from the 1950s onward.3 Figure 2 summarizes the different forms of industrial policies that contributed to the development of the salmon, fruit, forestry and wine sectors.
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