External Integration, Structural Transformation and Economic Development: Evidence from Argentina 1870-1914

59 Pages Posted: 25 Sep 2014

See all articles by Pablo D. Fajgelbaum

Pablo D. Fajgelbaum

University of California, Los Angeles (UCLA)

Stephen J. Redding

Princeton University

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

This paper uses the natural experiment of Argentina's integration into world markets in the late-nineteenth century to provide evidence on the role of internal geography in shaping the effects of external integration. We develop a quantitative model of the distribution of economic activity across regions and sectors. The model predicts a spatial Balassa-Samuelson effect, in which locations with better access to world markets have higher population densities, higher shares of employment in the non-traded sector, higher relative prices of non-traded goods, and higher land prices relative to wages. We use the model and data on population density and sectoral employment shares to recover sufficient statistics that isolate the economic mechanisms through which external and internal integration affect economic development. Our analysis highlights the role of complementary investments in internal infrastructure and technology adoption in mediating the economy's response to external integration.

Keywords: economic development, external integration, structural transformation

JEL Classification: F11, F14, O13, O14

Suggested Citation

Fajgelbaum, Pablo D. and Redding, Stephen J., External Integration, Structural Transformation and Economic Development: Evidence from Argentina 1870-1914 (June 2014). CEPR Discussion Paper No. DP10026, Available at SSRN: https://ssrn.com/abstract=2501498

Pablo D. Fajgelbaum (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

Stephen J. Redding

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

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