title: Essays on globalization, commodities, and local economic development
Creators: name: Soto-Díaz, Juan
Publisher: name: London School of Economics and Political Science (LSE)
Year: 2023

description: Over the course of this dissertation, I will explore the market mechanisms through which the unintended consequences of commodity booms in resource-oriented local labor markets have been fostered by features of international trade, which has been intensified over the past few decades. These features include offshoring, the presence of multinational companies, and participation in global value chains. For this purpose, this dissertation explores the cases of the mining and agricultural sectors in two major, resource-rich, emerging economies and exploits the different sources of exogenous variation peculiar to these commodity sectors to identify the mechanisms of trade in these sectors for contemporaneous and long-term local economic development. The work is organized in four chapters and provides a wide range of policy recommendations for resource-rich, developing economies to encourage a production structure that is more consistent with long-term local economic development. The first part of this dissertation comprises two chapters that explore the variation induced by the expansion of the copper industry in Chile, the largest copper producer, during the commodity price boom in the 2000s. The first chapter examines the heterogeneous economic impacts between multinational companies and domestic firms on the characterization of the long-term effects of a resource boom in local labor markets. On the side of firms, the empirical evidence suggests that although the linkage effect of multinationals can be lower than that of domestic firms due to offshoring, the local productivity spillovers induced by multinationals are slightly higher than those induced by domestic firms. These productivity spillovers can mitigate the productivity losses from crowding-out effects from the booming sector. Additionally, on the workers’ side, multinationals in the resource sector can affect the local economy by indirectly increasing housing rents via higher wages, which may imply lower, overall, welfare gains from the resource boom in relation to domestic firms. The second chapter analyzes the sectoral upgrading from low-processed mine copper to smelting and refined copper exports in Chile to estimate the local welfare and productivity gains from industrial upgrading in local labor markets. This chapter uses spatial variation in the relative importance between low-processed mine copper and smelting and refined copper production, with two main objectives: first, to measure the role of resource endowment and export competition in inducing industrial upgrading in the local labor markets; and second, to estimate the local welfare and productivity gains from industrial upgrading. The results suggest that the gains from this sectoral industrial upgrading in local labor markets are small and largely concentrated in the primary segment of mineral extraction. The last two chapters provide a different perspective by studying the different contexts and margins of adjustment of local areas to trade shocks to commodities. The third chapter examines the case of small-scale gold mining in the Peruvian Amazon to show how informal forms of extractive industries, relative to formal activities, are fostered by international demand shocks. For this purpose, this chapter estimates the heterogeneous effects of international price shocks on the intensity of activity of formal, informal, and illegal, small-scale gold producers. This chapter provides evidence that the differences in mining activity between illegal and legal producers disappear in the wake of high prices. The results suggest a rise in the profitability of illegal mining relative to formal and informal gold mining during price booms. Finally, the last chapter departs from the mining sector to analyze the extent to which increases in market access lead to higher local economic development and growth in remote places with low density and different degrees of specialization in agriculture. For this purpose, following a market access approach, this chapter estimates the effects of urbanization and road-infrastructure development on the structural transformation of rural villages in Chile. The empirical strategy uses the spatial and temporal variation in urban growth and road-infrastructure development to estimate the elasticities of access to urban markets by the population as well as to the farm and non-farm employment of rural villages. The results suggest important heterogeneity across rural areas, revealing that the growth of the non-farm sector induced by market access is higher in locations with better conditions for agricultural production.