Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

Up to 2008, the FPV government had increased export duties substantially. Export duties for
oilseeds reached 32% during 2007. However, the government also kept the local currency
undervalued, which benefitted exporting sectors.
In March 2008, the international price of oilseeds reached record levels. The government
attempted to introduce a new sliding-scale taxation system for soybean and sunflower exports that
would raise duties to 44% of the prices of that time. The announcement was met by a nationwide
lockout by farming firms. Government officials and government-affiliated labor unionists
denounced the lockout as being staged by big farming companies and having no popular support.
However, the pro-agriculture movement drew support from a large share of the middle-class
population that gathered in urban centers to oppose the new tax scheme. After four months of
political struggles that eroded the government's approval ratings and fractured the cohesion among
FPV members of Congress, the proposal was defeated in the Senate, despite the fact that the FPV
had a majority in both houses of Congress. The legislative elections of 2009 mirrored the major
setback suffered by the government the previous year. The FPV obtained 30% of the vote, 15%
less than in the previous election, and lost its majority in both houses.
During the events of 2008, the FPV took a clear stance in the distributional conflict and appealed to
the protectionist sentiment of its constituents. These appeals, which had been so effective during
the second half of the 20th century, resulted in a sharp reduction in approval ratings and votes.
Under the predictions of our model, agents with vested interests in the primary sector would be
less likely to vote for the FPV after the party revealed its position concerning the distributional
conflict. If agents voted according to their interests and trade policy was an important component
of electoral competition, we should observe a sharper fall in FPV votes in districts where the
majority of voters derive their income from the primary or the tertiary sector. We test that
prediction by comparing the percentages of votes that the FPV received in 2007 and 2009 in
different districts, or Partidos, of the Province of Buenos Aires.
For each of the 134 districts of Buenos Aires, we obtain a measure of the ratio of the population
that should support free trade. Using 2001 census data, all individuals that derive their income
from activities in the primary sector and all other individuals with some secondary schooling who
are not employed in the manufacturing sector are classified as "free traders". All individuals who
derive their income from the manufacturing sector and those individuals who do not have at least
some secondary schooling and are not employed in the primary sector are classified as
"protectionists".
In our model, we have abstracted from skill heterogeneity among workers. However, if skilled
workers are employed more intensively in the tertiary sector, then we might expect them to support
free trade. Similarly, if unskilled workers are employed intensively in the secondary sector, they
should support protectionism (see Galiani, et al., 2008b). The inclusion of educational attainment
in the classification captures such heterogeneity to some extent.
Suppose that, in district d , free traders and protectionists voted for FPV with probabilities π
d , f
and π
d , p
, respectively. Then, if the proportion of free traders in district d is f
d
, the total share