Commodity prices Shocks in Chile : local effects on poverty, and transmission mechanisms

Abstract

The commoditypricesshocksatthebeginningof2000'shadimportante ectsinChile,where one ofthemostrelevantshockwasonmetal-miningproducts.Thisinvestigationexaminesthe localeconomicimpactonpovertyofthemetal-miningcommoditypricesboomforthecountry, and thetransmissionmechanismsofthosee ects.Weusehouseholddatabetween1998-2013to create apaneldataatmunicipalitylevel,andexploitthedi erencesinmunicipalitiesexposure to changeinprices.Theresultsshowsareductioninpovertyratesassociatedwiththepositive terms oftradeshock,wherethemagnitudedependsontheexposurelevel.Countiesbelongingto the 95thpercentileoftheexposurelevelhadonaverageapovertyreductionof1.95percentage points(pp)duetotheshock.Wealsoexaminethelabormarketstransmissionmechanisms, nding thattheshockgeneratesanincreaseinunskilledworkersemploymentandwages.On average,forthelattergroupofmunicipalitiesthecommodityshockproduceanincreaseof1.07% in unskilledmetal-miningemployment,and6.69%inunskilledworkerswages