Argentina-Canada from 1870: Explaining the dynamics of divergence

Argentina and Canada started their industrialization processes while exporting natural resources and importing capital goods. These two nations were sparsely populated but received significant inflows of European immigrants since the second half of the nineteenth century. Until the start of World War II, both economies experienced similar per-capita GDPs. However, the gap between both per-capita GDPs began to grow, widening throughout the century. We carry out an empirical study of the deep determinants of the divergence process between both economies. We confirm that while Canada was drawn into a successful path due to the adjacency with a bigger and complementary economy, Argentina fell into a “staple trap”.