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External integration, structural transformation and economic development: evidence from Argentina

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  • Fajgelbaum, Pablo
  • Redding, Stephen

Abstract

This paper uses the natural experiment of Argentina’s integration into world markets in the late-nineteenth century to provide evidence on the role of internal geography in shaping the effects of external integration. We develop a quantitative model of the distribution of economic activity across regions and sectors. The model predicts a spatial Balassa-Samuelson effect, in which locations with better access to world markets have higher population densities, higher shares of employment in the non-traded sector, higher relative prices of non-traded goods, and higher land prices relative to wages. We use the model and data on population density and sectoral employment shares to recover sufficient statistics that isolate the economic mechanisms through which external and internal integration affect economic development. Our analysis highlights the role of complementary investments in internal infrastructure and technology adoption in mediating the economy’s response to external integration.

Suggested Citation

  • Fajgelbaum, Pablo & Redding, Stephen, 2014. "External integration, structural transformation and economic development: evidence from Argentina," LSE Research Online Documents on Economics 60285, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:60285
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    File URL: http://eprints.lse.ac.uk/60285/
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    Cited by:

    1. Esteban Jaimovich, 2018. "Roadways, Input Sourcing, and Patterns of Specialization," DOUMENTOS DE TRABAJO LACEA 016394, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA.
    2. L. De Benedictis & V. Licio & AM. Pinna, 2018. "The long-term effects of the historical Roman road network: trade costs of Italian provinces," Working Paper CRENoS 201801, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    3. repec:anr:reveco:v:9:y:2017:p:21-58 is not listed on IDEAS
    4. Natalia Ramondo & Andrés Rodríguez-Clare & Milagro Saborío-Rodríguez, 2016. "Trade, Domestic Frictions, and Scale Effects," American Economic Review, American Economic Association, vol. 106(10), pages 3159-3184, October.
    5. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, Elsevier.
    6. Stephen J. Redding & Esteban Rossi-Hansberg, 2017. "Quantitative Spatial Economics," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 21-58, September.
    7. Yuan Zi, 2016. "Trade Liberalization and the Great Labor Reallocation," IHEID Working Papers 18-2016, Economics Section, The Graduate Institute of International Studies.
    8. Klaus Desmet & Dávid Krisztián Nagy & Esteban Rossi-Hansberg, 2015. "The Geography of Development: Evaluating Migration Restrictions and Coastal Flooding," NBER Working Papers 21087, National Bureau of Economic Research, Inc.
    9. Nathaniel Baum-Snow & J. Vernon Henderson & Matthew Turner & Loren Brandt & Qinghua Zhang, 2015. "Transport Infrastructure, Urban Growth and Market Access in China," ERSA conference papers ersa15p1177, European Regional Science Association.
    10. Or Levkovich & Jan Rouwendal & Jos van Ommeren, 2017. "The impact of highways on population redistribution: The role of land development restrictions," Tinbergen Institute Discussion Papers 17-109/VIII, Tinbergen Institute.
    11. repec:eee:juecon:v:105:y:2018:i:c:p:162-175 is not listed on IDEAS
    12. Nathaniel Baum-Snow & J. Vernon Henderson & Matthew A. Turner & Qinghua Zhang & Loren Brandt, 2018. "Does Investment in National Highways Help or Hurt Hinterland City Growth?," NBER Working Papers 24596, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    External integration; economic development; structural transformation;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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