The rise and fall of Argentina

Abstract

On the eve of World War I, the future of Argentina looked bright. Since its promulgation of the 1853 Constitution, Argentina had experienced strong economic growth and institutional modernization, which had propelled it into the ranks of the 10 wealthiest countries in the world by 1913. In the aftermath of the war, Argentina's income per capita fell from a level approximating that of Switzerland to its current middle-income country status. Although numerous theories have been suggested to explain the swift decline, the general consensus highlights the fundamental importance of institutional environment in shaping the path of economic growth and development (North 1990; Weingast 1997). Although the literature has provided a great deal of evidence, the counterfactual scenario to Argentina's path to underdevelopment remains poorly understood. This paper exploits the temporal variation in institutional breakdowns to consistently estimate the contribution of de jure and de facto political institutions to long-run development, drawing on Argentina's extensive historical bibliography (

Another Case of the Middle-Income Trap: Chile, 1900–1939

“…In a country panel setup, for the synthetic control to represent the behaviour of a country in a variable of interest after the treatment starts, it should also resemble the country's behaviour in the periods before the treatment. Several articles utilise the SCM for studying the impact of policy changes and other exogenous events in comparative case studies; it has been applied in different contexts in the social sciences, from estimating the impact of terrorism on long-term growth (Abadie and Gardeazabal 2003), to estimating the effects of political figures such as Hugo Chavez in Venezuela (Grier and Maynard 2016), to the «rise and fall» of the Argentinean economy (Spruk 2019) and the economic impacts of natural disasters (Lynham et al . 2017).…”

“…In terms of convergence or lack thereof in Latin American countries, we should mention the recent paper by Ducoing et al . (2018); in terms of applications of the SCM, and again focusing on Latin American countries, we can mention the papers by Hannan (2017) and Spruk (2019).…”

Methodology for assessing the impact of institute on sustainable economic growth

“…Study [48] examined the contribution of institutional failures to long-term development, drawing on the history of Argentina. Since the adoption of the Constitution of 1853, Argentina has experienced rapid economic growth and institutional modernization, which by 1913 brought it to the top 10 richest countries in the world.…”

“…The institutional structure dooms it to decades of weak economic growth. The empirical strategy in the work of R. Spruk [48] is based on the construction of a counterfactual scenario for studying the path of Argentina's long-term development in the absence of disruptions, assuming that it will follow institutional trends in countries at parallel stages of development. Synthetic control and estimates of the difference in differences show that the creation of de jure and de facto political institutions more inclusive for non-elites is associated with an increase in per capita income between 1.8 and 2.6%, all other things being equal.…”

“…Estimates of synthetic control and difference in differences indicate an increase in per capita income in the absence of the key institutional failures, without which Argentina would be among the rich countries today. Argentina's per capita income in 2012 was about 34% of US income, and without the 1930 military coup, Argentina's long-term per capita income would be 59% of the US level, which is equivalent to New Zealand's income level [48]. Results [54] show that maximizing the return on infrastructure capital requires improving the quality of institutions.…”