Working Paper: NBER ID: w31890
Authors: Sebastian Edwards
Abstract: In this essay, I analyze Salvador Allende’s economic policies in Chile during the early 1970s. I argue that the explosion of inflation during his administration (above 1,500% on a six-month annualized measure) was predictable, and that the government’s response to it, through massive and strict price controls, generated acute macroeconomic imbalances. I postulate that the combination of runaway inflation, shortages, and black markets generated major disaffection among the middle class and that that unhappiness reduced the support for the Unidad Popular government.
Keywords: No keywords provided
JEL Codes: E31; E40; E52; F38; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high inflation (E31) | decreased political support (D72) |
| high inflation (E31) | economic discontent (E25) |
| economic discontent (E25) | decreased political support (D72) |
| strict price controls (E64) | shortages and black markets (P23) |
| shortages and black markets (P23) | decreased political support (D72) |