Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

production 15 . Moreover, beyond strictly political considerations, "institutions" on a larger
scale weren't really that stable after 1880. The 1880s were a decade of frenzied indebtedness,
monetary instability and inflation, recently christened as a time of "disorder and progress" 16 .
Political and economic institutions did show a more solid stability during the first three
decades of the 20th century.
A third hypothesis of Argentina's success before the Depression stresses technological luck.
The worldwide reduction in transport costs was probably the single most important
technological news of the second half of the 19th century. The impact of railways −and steam
navigation− wasn't a uniform blessing. The influence on profitability of a reduction in the cost
of transporting a ton of goods is larger for commodities with a higher transport component in
their cost. A decline in transport costs will affect only marginally the profitability of
producing gold, but will make a great difference for the transport of wheat or other cereals,
with a much lower value-weight ratio. The hypothesis is that countries with a "heavier" export
basket −ie., exporting goods with a lower value-weight ratio− would benefit more from a
decline in transport costs such as the one occurring in the second half of the 19th century. A
complementary hypothesis is that the appearance of a new transport technology will, ceteris
paribus, allow for the production of bulkier goods, thus increasing the average weight (ie.,
reducing the value-weight ratio) of exports. That actually took place in Argentina as pastoral
products were replaced by export oriented agriculture, a trend possible on a large scale only
after the arrival of railways ( Figure 9). It has been estimated 17 that by 1913 the existence of
railways represented savings of 7.3 cents of peso oro per ton, per kilometer − the difference
between 8.3ct. with carts and 1ct. with railways. For, say, a 400km trip, transporting a ton
cost 4 pesos by train and 33 through the old transport technology. By that time, Argentina
exported wheat at approximately 36 gold pesos the ton. The producer price net of transport
costs by train (32 gold pesos) was, thus, ten times higher than by cart (3 pesos). Compared to
these numbers, changes in the terms of trade of 20% or 30% look innocuous.
15 Sábato (1990).
16 Gerchunoff, Rocchi and Rossi (2008).
17 Summerhill (2000).