The Argentine Economy after Two Centuries
We document the behavior of income per capita in Argentina subsequent to independence and the civil wars of the mid-19th century. We first decompose the data to isolate low frequency behavior and show that, with significant departures over some periods of time, income per capita grew, on average, at 1.2% per year. The decomposition shows that the largest departure from this behavior is the period from 1974 to 2010, when there was a large and sustained deviation from the trend, with two subperiodsof rapid convergence. Using a simple version of Solow’s growth model as a conceptual framework, we focus our analysis on that particular period. We calibrate and simulate the model from 1950 onwards and use its predictions to provide a quantitative measure of the extremely poor performance of the Argentine economy since 1974. We also use a simple model of the government budget constraint to account for the macroeconomic history of Argentina during that same period. We argue that the systematic mismanagement of government budgets is the principal reason for Argentina’s long departure from the trend. The two subperiods of rapid convergence coincide with the two subperiods of macro fiscal discipline.
Volume (Year): 48 (2011)
Issue (Month): 2 ()
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