Estudios de Economía https://estudiosdeeconomia.uchile.cl/index.php/EDE <p>Estudios de Economía is published, since 1973, two times a year by the Department of Economics at the University of Chile. Its purpose is to publish empirical as well as theoretical papers in every field of Economics. All papers must go through refereeing process by two anonymous referees. As part of our editorial policy, an answer regarding the status of a paper will not exceed two months from its reception. If that were not the case, the authors are free to send their paper for consideration for publication elsewhere.</p> Departamento de Economía - Facultad de Economía y Negocios, Universidad de Chile. en-US Estudios de Economía 0304-2758 Introduction to the Special Issue https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76933 José De Gregorio Sebastian Edwards Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Half a century of Estudios de Economía https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76934 Rómulo Chumacero Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 The Role of Conglomerates in Chile https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76935 <p>In this article, I assess conglomerates in Chile have affected product market competition. The analysis starts with a review of the efficiency and rent-seeking for the existence of conglomerates. The prima facie evidence fails to find efficiency reasons for the existence of conglomerates in Chile, while it is compatible with rent-seeking explanations. For this reason, I analyze various rent-seeking explanations in detail. The evidence suggests that conglomerates in Chile enjoy and advantage in gaining political influence and market power and that this political influence and market power have the potential of distorting product market competition. I present a series of proposals to limit the rent-seeking dimensions of conglomerates.</p> Luigi Zingales Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Comments on “The rol of conglomerates in Chile” https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76938 Kevin Cowan Alejandro Micco Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Is Chile a role model of export diversification policies? A reassessment https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76940 Largely because of its vast copper reserves, Chile’s exports are highly concentrated on this low complexity product and this is often cited as a major drawback of its economic policy framework. However, its exogenous copper abundance conceals the country’s success in developing non-mineral and complex exports. This achievement is remarkable considering its remoteness from the large international economic centers, which limits its integration to global value chains. As suggested in this paper, this accomplishment reflects Chile’s strength in policy areas that foster non-mineral exports (including complex exports), making the country a role model in export diversification policies among emerging market countries. Gonzalo Salinas Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Exploring the Effects of FTAs on Chilean Exports: Heterogeneous responses and Financial Constraints https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76936 In this paper, we examine the influence of Free Trade Agreements (FTAs) on Chilean exports during the past thirty years. Over the last three decades, Chile has entered into 31 FTAs with 65 countries, encompassing nearly 90% of global GDP. Despite this, there’s a notable absence of empirical evidence regarding the extent and nature of the impact of these agreements on export volumes and product diversification. With a rich dataset encompassing bilateral trade flows at the product-level and key financial indicators, we employ a difference-in-differences approach to provide robust evidence of the positive impact of these FTAs on export levels and the variety of products exported. Our analysis also reveals variations in these effects based on the industries’ initial export share and trading partners’ income levels. Furthermore, we investigate how FTAs interacted with the financial development and capital control policies of trading partners, demonstrating their role in mitigating financial constraints on trade. Roberto Álvarez Eugenia Andreasen Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Collective Savings Pension Policy in an Economy with Heterogeneity and Informality https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76961 We compare the macroeconomic effects of a fully funded individual defined contribution (IDC) pension scheme, an unfunded pay-as-you-go (PAYG) system, and a collective defined contribution (CDC) regime. Under the latter, contributions of workers from a given cohort are invested in capital markets and repaid to that cohort upon retirement; its collective nature arises from an intragenerational progressive redistributive rule. Our results from an overlapping generations model calibrated for Chile show that the CDC scheme has similar macroeconomic effects as an IDC plan, including a moderate positive effect on the formal labor market, aggregate savings, and output. The PAYG system has negative effects on all these dimensions. Critical for the success of the CDC scheme is conditioning benefits on contributions, to incentivize formal labor status. We conclude that a CDC policy stands as a sustainable alternative for countries with significant labor informality and income inequality. Elías Albagli Agustín Arias Markus Kirchner Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Runaway Inflation in Chile, 1970-1973 https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76966 In this essay, I argue that the explosion of inflation during the Salvador Allende administration in Chile (above 1,500% on a six-month annualized measure) was predictable. The government’s use of massive and strict price controls generated acute macroeconomic imbalances. I postulate that the combination of runaway inflation, shortages, and black markets generated major hostility among the middle class and that that unhappiness reduced the support for the Unidad Popular government. Sebastián Edwards Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Institutional Vulnerability, Breakdown of Trust: A Model of Social Unrest in Chile https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76967 This paper revisits the standard explanations of the violent Chilean protests of late 2019, and in particular their exclusive focus on the role of inequality, which in fact had been falling prior to the emergence of unrest. Instead, we suggest that blame may lie in a crisis of trust in institutions, political and otherwise. We employ a formal model of how trust in government institutions can arise —and also disappear— overnight. In that model, the level of trust is tied (but not uniquely tied) to the level of civic capital in a society. If civic capital is above a certain threshold, then trust can only be high and increasing, but if civic capital is below that threshold, then the outcome is indeterminate, meaning the level of trust is vulnerable to self-fulfilling bouts of optimism or pessimism. The threshold for civic capital can be shifted by exogenous shocks to parameter values, including the quality of institutions, with the consequence that small shocks can have small and lasting effects if they take the system from one region to another. We document how these dynamics resemble the facts from Chile, where a small drop in reported institutional quality was associated with a large drop in measured trust around the time of the protests. In turn, the protests involved patterns of behavior (like the destruction of urban infrastructure, the evasion of user fees in buses and trains, and the non-repayment of student loans) which further deteriorated the capacity of the state to provide certain quality public services, and aggravated the decline in institutional trust. Andrés Velasco Robert Funk Copyright (c) 2024 Estudios de Economía 2024-12-12 2024-12-12 51 2 Long-Run Labour Income Distribution Dynamics: The Case of Chile 1990-2017 https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76963 We analyse the long-run evolution of the labour income distribution for Chile. To this end, we use thirteen waves of the CASEN household socioeconomic survey from 1990 to 2017. During this period hourly earnings inequality measured by the Gini coefficient fell from 0.47 to 0.40. We use a RIF regression approach similar to Ferreira et al. (2021) for Brazil to decompose changes in average earnings and earnings inequality. We do not find observable variables that explain –either through an endowment effect or through a structural price change– a significant part of the decrease in hourly earnings inequality. Richard Blundell Vicente Corral Andrés Gómez-Lobo Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Median labor income in Chile revised: Insights from Distributional National Accounts https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76964 A commonly used figure to highlight inequality in Chile is the median income of the Chilean socioeconomic household survey (known by its acronym in Spanish, CASEN). According to this survey, in 2017 the median monthly income per worker was CLP (Chilean pesos) 400,718 pesos, which compares to average income per worker from National Accounts of CLP 1,350,000 in the same year. For this difference to be correct, the implied Gini coefficient would be 0.7, which much above the Gini implied by the same survey. However, surveys, such as CASEN, often underreport income, particularly for middle- and high-income earners, leading to an underestimation of the median income. This study compares various data sources, including national accounts, household surveys, and administrative records, to create a more accurate picture of income distribution and median income. The corrected data shows higher median incomes and greater inequality than previously reported. On average, the underestimation of gross wages in the Chilean national household survey as compared to national accounts is 40%, significantly larger than other countries. About a quarter of this gap is attributed to the “missing rich” in the survey. For 2017, this equates to an estimated median gross income for dependent labor of CLP 600,000 and CLP 570,000 for all workers. The corrected mean-median income ratio (Gini) is 26% (17%) larger than in the raw survey of 2017 and falls only 6% (3%) between 2006 and 2017 compared with a larger decline of 12% (11%) in the original data. José De Gregorio Manuel Taboada Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Teacher Quality and Learning Inequality https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76962 This paper explores the contribution of teachers to student performance in Chile’s college admission test (PSU). Our analysis is based on a unique teacher-student matched dataset and decomposition methods. The findings suggest that teachers’ performance on the PSU and the characteristics of their educational degrees are significant predictors of students’ success. When controlling for students’ and predetermined school characteristics, the gap between voucher and public schools is reduced. Productivity differences emerge as key factors driving the disparities across school types. The analysis underscores the crucial role of teacher-student interactions in shaping student outcomes. Macarena Kutscher Catalina Morales Cristina Riquelme Sergio Urzúa Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2 Risky Behavior among Chilean Youths https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/76965 This paper examines the connection between risky behaviors and various socioeconomic factors, including skills, preferences, aspirations, expectations, and exposure to shocks. Using a representative sample of Chilean youths aged 15 to 19 years old, our analysis identifies self-esteem, risk aversion, and educational aspirations as relevant factors associated with participation in risky activities. Remarkably, even after accounting for socio-demographic factors, skills, expectations, aspirations, and preferences, we uncover a significant correlation between exposure to shocks at both individual and family levels and engagement in risky behavior. Particularly striking is the association between experiencing job loss and family illness and the prevalence of risky behaviors. Additionally, we observe positive correlations among the unexplained variability of these behaviors, suggesting a complementary relationship between these activities. While these patterns are correlational rather than causal, they offer valuable insights into the determinants of risky decision-making among youths. Rafael Novella Andrea Repetto Copyright (c) 2024 Estudios de Economía 2024-12-10 2024-12-10 51 2