Growth and regional disparities in the Southern Cone, 1890-1960

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November 2017
Paper author(s): 
Henry Willebald
Marc Badia-Miró
Esteban Nicolini
Macroeconomics - Economic growth - Monetary Policy

The aim of this paper is to analyze the evolution of regional income disparities in the South American Southern Cone (SASC) in historical perspective. One of the first results of our analysis is that most of the regional inequality in this geographic area stems from differences within countries rather than from disparities across countries. The second result is that the evolution of regional inequality between the end of the 19th century and the second third of the 20th century is different in each country: while Chile shows a higher inequality and a U-shaped evolution (reduction of inequality and a slight increase in the 1960), Uruguay presents a monotonically declining inequality and Argentina exhibits a U-shaped evolution with decreasing disparities until the beginning of the 20th century and increasing inequality afterwards. When the entire subnational units are analyzed together, we find a U-shaped curve which started at the end of the 19th century with high levels of inequality, a minimum is found in the 1940s and another local maximum ended with the collapse of the Import Substitution Industrialization (ISI) polices in the 1960s-1970s. We also analyze regional convergence in the long run for the Southern Cone at both national and regional level. The existence of convergence at a national level depends on the periods and countries: while Uruguay shows convergence in all the analyzed sub-periods, the provinces of Argentina only converge during the period of the first globalization; most of the departments of Chile converge in general but the presence of outliers induces the rejection of convergence hypothesis during the first globalization. Convergence at a regional level (including all the sub-national units from the three countries in the same analysis) is accepted for the period of the first globalization but rejected for the central decades of the 20th century. The empirical findings are interpreted as the result of the combination of the varying potential of the sub-national units for taking advantage of (i) the forces of agglomeration (inducing high growth rates in the main cities and, in particular, in the administrative capitals), (ii) the abundance of natural resources, and (iii) the stimulus originated in technological change, integration (or dis-integration) to international markets and public policies for industrialization.


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