The Politics of Institutional Renovation & Economic Upgrading: Lessons from the Argentine Wine Industry

60 Pages Posted: 21 Jul 2006

See all articles by Gerald A. McDermott

Gerald A. McDermott

University of South Carolina - Moore School

Date Written: December 2005


Through a comparative, longitudinal analysis of the wine industry in two Argentine provinces, this article examines how different political approaches to reform shape the ability of societies to build new institutions for economic upgrading. The article finds that inherited structural factors per se can not easily explain the different solutions to this challenge. A better explanation focuses on how governments confront the dual challenge of redefining the boundary between the public and private domains and of recombining the socio-economic ties among relevant firms and their respective business associations. A "depoliticization" approach emphasizes the imposition of arm's-length incentives by a powerful, insulated government, but appears to contribute little to institutional change and upgrading. A "participatory restructuring" approach promotes the creation of public-private institutions via adherence to two key principles: a) inclusion of a wide variety of relevant stakeholder groups and b) rules of deliberative governance that promote collective problem-solving. This latter approach appears to have the advantage of facilitating collaboration and knowledge creation among previously antagonistic groups, including government.

Keywords: institutions, networks, upgrading, Latin America, industrial policy

JEL Classification: D8, F23, H4, L1, L5, M13, O1, P16

Suggested Citation

McDermott, Gerald A., The Politics of Institutional Renovation & Economic Upgrading: Lessons from the Argentine Wine Industry (December 2005). William Davidson Institute Working Paper No. 817, Available at SSRN: or

Gerald A. McDermott (Contact Author)

University of South Carolina - Moore School ( email )

1404 Greene St
Columbia, SC 29208
United States
803-777-1035 (Phone)


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