Macroeconomic convergence and productivity dynamics in Chile (1990–2023): A comparative analysis with intermediate economies

Abstract

Introduction: The hypothesis of economic convergence is one of the most recurrent and debated topics in the growth literature. In Chile, the literature has primarily explored convergence among its regions; however, few studies place the country in an international perspective, comparing it to a group of economies that share similar structural challenges.

Objective: This article empirically analyzes the convergence process of Chile with respect to a group of middle-income OECD economies (Spain, Portugal, Greece, South Korea, the Czech Republic, Hungary, Poland, Mexico, and Turkey) during the period 1990–2023.

Method: Dynamic panel data and System GMM estimates are used.

Results: Evidence of conditional β convergence is found, with a rate of 2.80% per year, consistent with the international literature. However, the σ convergence analysis shows that income dispersion has only been moderately reduced, with a structural break identified in 2008 after which the process slowed. The results indicate that Chile achieved partial income convergence, but a significant gap in total factor productivity (TFP) persists compared to South Korea and the Central European economies.

Conclusion: Threshold model estimates suggest that the Chilean economy faces the characteristic symptoms of the "middle-income trap": slowing growth, stagnant productivity, and low economic complexity. Policy implications point to the need to strengthen investment in R&D, improve the quality of advanced human capital, and diversify the productive structure toward sectors with greater technological complexity.