The forsaken road: Reassessing living standards following the Cuban Revolution and the American embargo

We investigate the causal effects of the 1959 Cuban Revolution on income using a synthetic control approach. We employ a novel dataset with revised GDP estimates that do not rely on the regime’s self-reported statistics. We also analyze GDP estimates net of aid coming from the Soviet Union. Our identification strategy allows us to separate the direct effects of the revolution from the diplomatic events that ensued. By overcoming concerns that Cuban GDP statistics are inflated either by the regime’s direct manipulation or by Soviet aid, we identify a large decline in Cuban GDP per capita relative to its counterfactual. The decline is larger when accounting for Soviet aid. The embargo only accounts for a minor share of Cuba’s under-performance relative to the counterfactual. Our results hold after being subjected to multiple robustness checks and lead to the conclusion that the transition to socialism was the main driver of the inferior economic path Cuba has followed since 1959.