Commodity Prices, Growth and Productivity: a Sectoral View

We construct TFP series at a sectoral level for Chile and analyze how commodity price shocks affect these measures. The Dutch-Disease literature is concerned by that possible fall in productivity in the industrial sector after a commodity boom, as that sector may be a mayor driver of TFP improvements for the economy as a whole. Our results provide evidence that indeed Industrial TFP is negatively affected by positive commodity price shocks, both after either temporary or permanent shocks. However, despite this effect, TFP at the aggregate level is not necessarily reduced. In particular, Aggregate TFP does not seems to be significantly affected by the shock, while if we exclude Commodities and Utilities, or if we just focus on non-traded sectors, TFP actually tends to increase. This results holds even controlling for the possibility of sectoral relocations of resources in measuring TFP at an aggregate level