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What ever happened to the Puerto Rican sugar manufacturing industry?

  • Benjamin Bridgman
  • Michael Maio
  • James A. Schmitz, Jr.

Beginning in the early 1900s, Puerto Rican sugar has entered the U.S. mainland tariff free. Given this new status, the Puerto Rican sugar industry grew dramatically, soon far outstripping Louisiana’s production. Then, in the middle 1960s, something amazing happened. Production collapsed. Manufacturing sugar in Puerto Rico was no longer profitable. Louisiana, in contrast, continued to produce and grow sugar. We argue that local economic policy was responsible for the industry’s demise. In the 1930s and 1940s, the local Puerto Rican government enacted policies to stifle the growth of large cane-farms. As a result, starting in the late 1930s, farm size fell, mechanization of farms essentially ceased, and the Puerto Rican sugar industry’s productivity (relative to Louisiana) rapidly declined until the industry collapsed. The overall Puerto Rican economy also began to perform poorly in the late 1930s. In particular, Puerto Rico’s per capita income was converging to that of the poorest U.S. states until the late 1930s, but since then it has lost ground to these states. One naturally wonders: was the poor overall performance of the Puerto Rican economy also the result of policy? We show that Puerto Rico embarked on other economic policies in the early 1940s that proved to be major setbacks to its economic development.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 477.

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Date of creation: 2012
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Handle: RePEc:fip:fedmsr:477
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  1. Simon Johnson & William Larson & Chris Papageorgiou & Arvind Subramanian, 2009. "Is Newer Better? Penn World Table Revisions and Their Impact on Growth Estimates," Working Papers 191, Center for Global Development.
  2. Thomas J. Holmes & Sanghoon Lee, 2009. "Economies of density versus natural advantage: crop choice on the back forty," Working Papers 668, Federal Reserve Bank of Minneapolis.
  3. Bond, Eric W, 1981. "Tax Holidays and Industry Behavior," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 88-95, February.
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  5. Ward, Marianne & Devereux, John, 2012. "The Road Not Taken: Pre-Revolutionary Cuban Living Standards in Comparative Perspective," The Journal of Economic History, Cambridge University Press, vol. 72(01), pages 104-132, March.
  6. Benjamin Bridgman & Shi Qi & James A. Schmitz, Jr., 2009. "The economic performance of cartels: evidence from the New Deal U.S. sugar manufacturing cartel, 1934-74," Staff Report 437, Federal Reserve Bank of Minneapolis.
  7. Manuel García-Santana & Josep Pijoan-Mas, 2010. "Small Scale Reservation Laws And The Misallocation Of Talent," Working Papers wp2010_1010, CEMFI.
  8. Eugene Tian & James Mak & PingSun Leung, 2011. "The Direct and Indirect Contributions of Tourism to Regional GDP: Hawaii," Working Papers 2011-5, University of Hawaii Economic Research Organization, University of Hawaii at Manoa, revised Sep 2011.
  9. Robert E. Lipsey, 2007. "Defining and Measuring the Location of FDI Output," NBER Working Papers 12996, National Bureau of Economic Research, Inc.
  10. Germà Bel, 2009. "The First Privatization Policy In A Democracy: Selling State-Owned Enterprises In 1948-1950 Puerto Rico," IREA Working Papers 200915, University of Barcelona, Research Institute of Applied Economics, revised Jun 2009.
  11. Pete Klenow & Gunjan Sharma & Albert Bollard, 2011. "India's Mysterious Manufacturing Miracle," 2011 Meeting Papers 1176, Society for Economic Dynamics.
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