Can the initial distribution of land, in a country's early history, affect its subsequent economic development? In this paper, I show that when land ownership is sufficiently concentrated, the landed elite will lobby the government to raise barriers to industrialization in order to protect its rents in the rural economy. I develop a small open economy model in which barriers take the form of tariffs on the imports of intermediate inputs used in industry. Such tariffs can affect both the timing and the pace of industrialization. The quantitative application of the theory is motivated by an important question in economic history: why did Argentina not replicate Canadian economic success, despite reasonable expectations to the contrary in the late 19th century? I provide evidence that Argentina had a markedly higher inequality in land ownership than Canada. Taking as given the observed differences in land distributions in the early 20th century, the model produces differences in equilibrium tariffs similar to the ones observed at the time, and the ones required to account for the Canadian-Argentine income gap until 1950. Over time however, as land becomes unimportant in production, land inequality ceases to be a source of policy disparities and income gaps. (Copyright: Elsevier)
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 11 (2008) Issue (Month): 2 (April) Pages: 257-282 Download reference. The following formats are available: HTML,
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Find related papers by JEL classification: D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation
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Finn E. Kydland & Carlos E. J. M. Zarazaga, 2002.
"Argentina's Lost Decade,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 152-165, January.
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Goodfriend, Marvin & McDermott, John, 1995.
"Early Development,"
American Economic Review,
American Economic Association, vol. 85(1), pages 116-33, March.
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Marvin Goodfriend & John McDermott, 1994.
"Early development,"
Working Paper
94-02, Federal Reserve Bank of Richmond.
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Harold L. Cole & Lee E. Ohanian & Alvaro Riascos & James A. Schmitz, Jr., 2004.
"Latin America in the rearview mirror,"
Staff Report
351, Federal Reserve Bank of Minneapolis.
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