Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

Argentina in 1942 (4.1%) is not very far from the one observed in the United States in
1916 (4.4%). Secondly, the dynamics in Argentina between 1932 and 1951 seem to
reproduce the shape of US top income shares between 1922 and 1940 but at higher
levels, as if the Argentine cycle lagged around 10-13 years with respect to the United
States. This reinforces the idea that the pre-1930 figures in Argentina could
reasonably be higher than that observed in 1932, in parallel with the evolution in the
US, where the top 0.01% share declined from 4.4% in 1916 to 1.7% in 1921. It is also
possible that the higher top shares in Argentina as compared to the US correspond to
lower marginal tax rates.
As described in Atkinson and Piketty, 2007, the drop in income concentration
between 1914 and 1945 in Anglo-Saxon and continental Europe countries was
primary due to the fall in top capital incomes, as capital owners incurred severe
shocks from destruction of infrastructure, inflation, bankruptcies and fiscal policy for
financing war debts. The reason why capital incomes did not recover during the
second half of the century is still an open question; Piketty, 2003 and Piketty and
Saez, 2006 suggest that the introduction of generalized progressive income and estate
taxation made such a reversal impossible. For most of the period, the data for
Argentina do not offer information about the composition of income by brackets. This
is unfortunate, as economic mechanisms can be very different for the distribution of
income from labour, capital, business and rents, and limits the interpretation and
comparison of results. In any case, while top shares started a sustained decrease by the
beginning of the Second World War in the developed world, they kept growing in
Argentina, favored by the export demand from Europe.
The Perón years (1946-1955) coincide with a clear decline in the share of the top
percentile, although the evidence also reveals the limited effect on the upper part of
the distribution when compared to international standards: by 1954 the top percentile
shares were still higher than those found in the United States, France, Canada,
Australia or Spain. Here it is worth noticing a striking contrast originated in economic
policy between Argentina and Australia. As Atkinson and Leigh, 2007 describe, the
effect of the commodity price boom after the Second World War directly affected top
shares in Australia, generating a clear spike in 1950, mainly due to the peak of wool
prices which sheep farmers received in that year (Figures 3 and 5). The state
management of exports in Argentina seems to have been a powerful tool in extracting
a fraction of the surplus from exporters, and as a sign of the distributional conflict
surrounding trade policy the IAPI was disbanded as soon as Perón was deposed in
1955.