The Rise and Fall of Argentina

Abstract

I examine the contribution of institutional breakdowns to long-run development, drawing on Argentina’s unique departure from a rich country on the eve of World War I to an underdeveloped one today. The empirical strategy is based on building a counterfactual scenario to examine the path of Argentina’s long-run development in the absence of breakdowns, assuming it would follow the institutional trends in countries at parallel stages of development. Drawing on Argentina’s large historical bibliography, I have identified the institutional breakdowns and coded for the period 1850–2012. The synthetic control and difference-in- differences estimates here suggest that, in the absence of institutional breakdowns, Argentina would largely have avoided the decline and joined the ranks of rich countries with an income level similar to that of New Zealand.

Keywords: long-run development, new institutional economics, political economy, Argentina, applied econometrics

JEL Classification: C23, K16, N16, N46, O43, O47