---
title: "Resource Depletion and Productivity in Chilean Copper Mining"
date: 2026-08-03
updated: 2026-08-03
tags: [copper, productivity, mining, Chile, economics]
canonical: https://www.fernandogreve.com/blog/2026-08-03-copper-productivity-resource-depletion
---
# Resource Depletion and Productivity in Chilean Copper Mining

*Updated: 2026-08-03*

> **TL;DR:** In a 2018 article in *Resources Policy* with Marcelo Villena, we show that the total factor productivity of Chilean copper mining fell sharply between 1985 and 2015 — but not as much as traditional estimates suggest. Around 15% of the measured decline is explained by resource depletion: falling ore grades force mines to use more inputs per ton of copper, which standard methods misread as lost efficiency.

## Why does copper productivity matter for Chile?

Chile is the world's largest copper producer, holding roughly **28% of the world's copper reserves**. During 2010–2014 copper accounted for **53% of Chilean exports and 16.4% of GDP**. Yet the country's share of world production slipped from 35% in 2000 to about 30%, and reported productivity in the industry has been falling for decades. Understanding *why* matters for both mining policy and the public finances: Codelco, the state producer, went from roughly 80% of national output in the early 1990s to less than a third.

## What does the paper ask?

The standard story is that Chilean copper mining became dramatically less efficient. But mining has a feature that most industries do not: the resource itself degrades. As the richest deposits are worked, **ore grades decline**, so extracting the same ton of fine copper requires more capital, labour, and energy. If you estimate productivity without accounting for that, you attribute the effect of geology to management.

[The paper](/publications/resource-depletion-productivity-chilean-copper) asks: how much of the measured productivity decline in Chilean copper mining between 1985 and 2015 is genuine technological stagnation, and how much is resource depletion?

## How is depletion measured?

We estimate a **long-run cost function** for the industry with capital, labour, and energy as inputs, following the approach of Rodríguez & Arias (2008) and Zheng & Bloch (2014), and introduce resource depletion — proxied by the decline in ore grade — as an **exogenous, unpaid force that works against technological change**. Ore grade is inversely related to production: the more that has been extracted, the poorer the remaining rock.

## What did we find?

Total factor productivity did fall sharply over 1985–2015 — the decline is real. But **about 15% of the measured decline is attributable to the increase in the resource depletion variable**, not to a loss of efficiency. Ignoring geology makes Chilean mining look worse than it is, and policy aimed at "recovering" that productivity would be chasing a target that is partly unreachable.

The full text, citation, and BibTeX are on the [publication page](/publications/resource-depletion-productivity-chilean-copper). The article appeared in *Resources Policy*, Volume 59 (2018), pages 553–562.

*Section: Research*
*Tags: copper, productivity, mining, Chile, economics*