Abstract:
We study how commodity booms affect productivity using administrative microdata from Chile that combine firm exports by products and destinations, employer-employee records, and firm-to-firm production networks. Exploiting differential Chinese demand for Chilean commodities, we construct firm-specific commodity price shocks. We find three micro-level mechanisms. First, more exposed firms experience larger revenue increases but no differential productivity gains, channeling revenues into wages and materials. Second, among exposed firms, low-productivity firms expand employment while high-productivity firms do not, hiring workers from more productive employers. Third, domestic suppliers with greater indirect exposure show larger increases in sales and productivity. We develop a model with heterogeneous export wedges and labor market frictions where commodity booms can reduce sectoral aggregate productivity by exacerbating input misallocation — consistent with both the firm-level and aggregate evidence. Calibrated to Chile, this mechanism explains half of the mining TFP decline from 2005 to 2013.