Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

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10000 0.6 9000 0.55 8000 0.5 7000 0.45 6000 0.4 5000 0.35 4000 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0.3 Real GDPpc Gini Source: The Gini coefficient includes only Buenos Aires and its metropolitan area, it was computed using the Socioeconomic Database of Latin America and the Caribbean (CEDLAS- WB), the Real GDPpc are values reported in World Development Indicators (WB). All the historical literature accepts this perspective as a given 5 , providing a cohesive and unanimous answer to the question about economic performance: Argentina’s exceptional bad performance since democracy is considered a stylized fact. The purpose of this paper is to challenge this view. In fact we want to challenge the view that economic performance during Argentina’s recent democracy has been dismal, both in terms of earnings growth as well as in terms of income distribution. Using the shift in the Engel curves to re-estimate the relevant price levels, we will argue that real earnings growth has been steady and much bigger than measured, and that income distribution has improved. If we are able to convince our readers of our results, our work would throw a completely new light on recent economic performance. Under this new light the exceptionalism that has been the focus of the other chapters of this book, would appear to have been left behind already two decades ago. With commodity prices on a relatively strong footing, a region that appears to be increasingly in order, and large wealth increases from the development of mining, agricultural and energy resources, the prospect for Argentina looks bright in the foreseeable future. The outline of the paper is extremely simple. Section 2 explains the methodology to correct the bias in the price levels typically used to estimate real income growth; section 3 shows the results; and section 4 provides some final thoughts. Our conclusions are that Argentina’s exceptionalism is a presumption that still needs to be proven, and that Argentina’s economic performance during our recent democracy, both in terms of 5 There are many articles that analyze the performance of Argentina during this period. See for example Damill and Frenkel (1990 and 2003), Damill, Frenkel, and Mauricio, R. (2002), Gerchunoff and Llach (2003a) for output performance and its determinants. For papers specially focused on income distribution and its determinants see Altimir and Beccaria (1999 and 2001), Altimir, Beccaria and Gonzalez Rozada (2002), Gasparini (2003), Lindenboim, Graña and Kennedy (2005) and Cruces and Gasparini (2008).
income distribution and earnings growth has been substantially better than accepted in the economic debate. 2 Methodology It is standard to use income as the most relevant measure to estimate well being. However, to obtain a comparable measure of income over time, it is necessary to deflate the nominal measures at each specific moment by a price series, most commonly, the consumer price index (CPI). In the case of Argentina, in particular, the one used it that corresponding to the city of Buenos Aires and its metropolitan area. This a Laspeyres type index, with a fixed basket, and subject to a series of well known biases. 6 First, these indexes overestimate inflation, because they omit the effect of substitution between goods, changes in quality of the goods and the impact of the availability of new products. Second, the use of a common price index, may be problem when building measures of income distribution because it assumes that baskets are equivalent across all income groups. In Argentina, consumption surveys are not very frequent. The last three were conducted in 1984-85, 1996-97 and 2004-05, and where undertaken to update the basket in the CPI. However, the large time gap between updates, may lead to significant biases, particularly if we consider the large structural changes undergone by the Argentina economy over the last 25 years (e.g. a large trade liberalization process). 7 Thus, correcting for the biases produced in the CPI can change the evolution of real income and correcting for the biases at different income levels can also change the evolution of income distribution during this period. 8 These consumption surveys can be used to estimate the biases following the methodology of Costa (2001) and Hamilton (2001). In a nutshell the methodology uses the assumption that Engel curves for food should be relatively stable. If this is the case, when the estimation of the Engel curves at different dates show shifts, it is assumed that these correspond to CPI bias. To illustrate the point, consider two points in time between which the share of food in income declines with a stagnant earning levels. Under the assumption that the Engel curve is stable, this provides a presumption that CPI may be biased (overestimated in this case) as a falling income share is consistent with rising, not stagnant, income levels. Thus, the changes in the share, with some assumptions, may be linked to the CPI bias. Of course, the biases in the Engel curve are obtained after correcting for changes in relative prices and household characteristics. In later work Carvalho Filho and Chamon (2006) use semi-parametric models to extend the methodology to estimate the biases at different income levels thus allowing to tackle the issue of income distribution. We should clarify that in previous work, identification was built from exploiting the differences across regions. In the case of Argentina, however, our data contained only 6 Diewert, Greenlees, and Hulten (2009) summarizes the main developments of this literatura and how they impacted on methodological cahnges in the US. 7 In many countries these surveys are annual, and basket revisions are done at higher frequencies. 8 This adjustment occurs by allowing an adjustment in household income by a specific index that considers the prices paid by that household.
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Exceptional Argentina Di Tella, Gla
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A third explanation of Argentina’
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Maddison's "Western Offshoots" by l
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A final point on this mechanistic a
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GDP in 1900 at 12,100 (in constant
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nationalized railways and banks, to
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country interacted with initial con
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1900. As there is an extremely stro
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Between the 1940s and 1970s income
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particularly in terms of food consu
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Even before the 2001 crisis, Argent
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Scandinavia and Northern Europe the
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Figure 4. A modified Human Developm
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Figure 6. Per capita GDP across Arg
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production 15 . Moreover, beyond st
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Figure 10. Average weight of export
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etween the prewar export-led growth
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which was wholly bound to local dem
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protectionism", certainly stronger
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agricultural pastures and cropland
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far. Argentina's differential popul
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Appendix Figure A. 1. Argentina's r
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Peru 35 38 25 34 34 34 32 29 26 27
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Like the Llach paper, the Campante
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I. Introduction Both Buenos Aires a
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across the ocean. Over the course o
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Buenos Aires’ hinterland rose dra
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significantly greater education lev
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Why is there such a difference in l
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illion dollars today). Each Chicago
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Chicago also appears to have been a
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casualties. Roca secured the presid
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capital to St. Petersburg he was pr
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and the logarithm of per capita GDP
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Moreover, years of schooling today
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y its overwhelming political import
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200 Figure 2a: Annual Wage Data 187
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Figure 3: Real Monthly Wages in Chi
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Log GDP per capita 2000 5 6 7 8 9 1
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Figure 7 Log GDP per capita 2000 7
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Table 2: Top 5 Industries in Chicag
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Table 4: 19th Century Variables and
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A simple calculation suggests that
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toy model with a minimum of paramet
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were lifted, but import taxes remai
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to compute that the MPK term above
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versus foreigners, on most occasion
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X institutions policies income p
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series variation. The coincidence o
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Figure 1—The Great Divergence and
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Figure 3—Trade taxes
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Transition Remarks The previous ess
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CHAPTER FOUR Argentine Trade Polici
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Argentine comparative advantage lie
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thousands of product lines in Argen
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Japan). Third, the agricultural pro
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different preferences over trade pr
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two nomenclatures had to be manuall
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esult, soybeans were finally adopte
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Figure 1 Trade Openness Exports + I
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Figure 5 Relative Sectoral Protecti
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Figure 7 Average Export Taxes 0 10
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Figure 9 Average Export Taxes at 2-
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Figure 11 Evolution of Argentine Ag
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Figure 13 Yields in Agriculture: Wh
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Table 2 Livestock per Capita 1895 C
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Table 5 Mean Share of Exports (Impo
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Table 7 Tariff Statistics for perio
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Table 9 Evolution of Industrial Pro
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CHAPTER FIVE Path-Dependent Import-
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actors, and they were demanding pro
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the primary sector, using land and
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Figure 1: The Long Run: Four Region
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Finally, in the reversal of pattern
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Figure 3: Medium Run Preferences ov
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sector to give rise to a protection
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technological improvements or incre
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Argentina did relatively well when
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World War, a second globalization e
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Argentine primary sector and ensure
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Clearly, world market conditions we
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for the years to come. The most imp
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governments zigzagged in their poli
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public spending on infrastructure s
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understand the rise of the urban-ru
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To sum up, by the beginning of the
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has a comparative advantage in the
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L λ = m L K κ = m K That is, λ i
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K c a = 1− α 1−α T A ( κ )
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Given a set of parameters ϒ , φ a
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consumption of good i. For any agen
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Proposition 3 In the short run, pro
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ρ 1/ 1 ρ ρ 1 ( ξ ξ ) 1 TT K ,
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Up to 2008, the FPV government had
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negative correlation between the pr
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policies would, supposedly, eviscer
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I. Introduction In a seminal study,
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terms, Peronist beliefs in the 1990
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Several authors have emphasized the
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foreign capital and trade as the gl
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of already available information. A
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having the need to do more than wak
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Argentines (who implement these pol
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opinion about elements of capitalis
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intense (the proportion is under 1.
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involved in social ordering that wi
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cost of the deviating firm, since w
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Admissible Region Bounds on w b Nex
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The previous proposition may be par
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and note that Peron insists on the
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Appendix 2: Definitions of Variable
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Table II: The Beliefs of Peronists
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Transition Remarks The previous cha
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CHAPTER SEVEN A Short Episodic Hist
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the income distribution between 193
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empirical evidence and on existing
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of commodities. The country was off
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accounts increased by 8% between 19
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Argentina in 1942 (4.1%) is not ver
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This change in inequality is also r
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1982, when Mexico’s default on it
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1995. While growth bounced back qui
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The main characteristics of this ep
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skilled workers that more than offs
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Page 263 and 264: This chapter described the level an
Page 265 and 266: Transition Remarks Economic success
Page 267 and 268: CHAPTER EIGHT Why do Argentines tru
Page 269 and 270: in the 1970s and 1980s. Despite the
Page 271 and 272: Figure 5. Percentage of the populat
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Page 279 and 280: Figure 7. Share of people having a
Page 281 and 282: 6. Why did the Argentinean Police d
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Page 287 and 288: Table 2. Comparative facts for cano
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Page 293 and 294: Table 6. Tierra del Fuego Subinspec
Page 295 and 296: 4. Police deaths during the 20th ce
Page 297 and 298: Of course, these conclusions depend
Page 299: “stop go” dynamics 4 ). In fact
Page 303 and 304: Figure 2. Basic Statistics Food Clo
Page 305 and 306: Table 2 Dep. Var.: Share of food Sm
Page 307 and 308: Figure 3. Variety in food retailing
Page 309 and 310: Table 3 Dep. Var.: Share of food at
Page 311 and 312: 3.3 Income distribution effects The
Page 313 and 314: Figure 6. Individual Effects Using
Page 315 and 316: Expenditure Income 5000 6000 4000 4
Page 317 and 318: Figure 10. Income distribution Dens
Page 319 and 320: Appendix A: Estimation strategy Est
Page 321 and 322: w ijt where [ ln( 1+ ∏ ) − ln(
Page 323 and 324: 2.2 Income distribution effects Fol
Page 325 and 326: Appendix B: The data To run our est
Page 327 and 328: Appendix C: Additional tables C1: B
Page 329 and 330: C3: Table 3 coefficients Dummy for
Page 331 and 332: CONCLUSION 20 th century Argentina
Page 333 and 334: can be harbingers of worse things t
Page 335 and 336: Ahumada, Hildegart, Alfredo Canaves
Page 337 and 338: Barro, Robert J. 2005. “Rare Even
Page 339 and 340: Burzaco, Eugenio et al. 2004. “Ma
Page 341 and 342: Cortés Conde, Roberto and María M
Page 343 and 344: Di Tella, Rafael, Juan Dubra and Ro
Page 345 and 346: Gaggero, Horacio and Alicia Garro.
Page 347 and 348: Gerchunoff, Pablo, Fernando Rocchi
Page 349 and 350: James, Daniel. 1988. “October 17
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Maddison, Angus. 2006. The World Ec
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Piketty, T. 2003. “Income Inequal
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Spiller, Pablo and Mariano Tommasi.
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Williamson, Jeffrey G. 1995. “The
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