Latin American Development to 1913 Flashcards
How was Latin America in 1870-1913?
-Relative income gaps are substantially smaller compared today
-Argentina and Uruguay have around same wages as US
(wages are around higher in L.A, than places in Europe such as Spain)
-given these wages, people immigrated to SA
-Argentina has more immigrant inflows per 1000 people than US and Canada
Argentina immigration stats?
-Argentina has more immigrant inflows per 1000 people than US and Canada
How was L.A different to Europe and U.S?
Latin America was export oriented (agriculture and minerals) compared to Europe and America model of development focused on industry
Problem of being export orientated?
diminishing returns (e.g. resource depletion and closing of frontier), unless we can use this to increase productivity
How can we increase productivity from export orientated country?
-If spillover from primary products to other sectors exist (linkage effects) , economies can focus first on these primary products then diversify through stimulus of linkages. (This is a good development path)
rather than just relying on exports
How do linkage effects work?
Backward linkages: growth in export good stimulates input production (fertilizer, tractors -> agriculture)
Forward linkages: growth in export good stimulates production of goods using export good as input (furniture <- timber)
Final demand linkages: increase in demand for complementary goods and services (finance, transportation, communication)
How do we see if there were any linkage effects in Latin America from export development?
2 complementary sectors: agriculture and manufacturing
Was there linkages in agriculture in Latin America?
-No
-Output/labour ratios consistent with low productivity
-Low land productivity: In Mexico (1913), grain yields/hectare half of US, a quarter of AUS/NZ/Canada
Suggests few positive spill overs from export sector (only Argentina is outlier)
-
Was there linkages in Manufacturing in Latin America?
-Limited growth of manufacturing even in export leaders (Chile and Argentina)
-shown by % in GNP
-Where manufacturing did take root, almost none exported until WW1
-Suggests linkage effects from exports to complementary activities muted
Why did linkage effects in manufacturing fail in Latin America?
-Tariffs: Increasing trade barriers
- to generate revenue for government, but raised input costs/dampened productivity in protected industry
-Internal barriers: interstate taxes raise costs, reduce market potential
Why was there low relative agricultural productivity?
-Labour markets: expanding urban labour markets in Latin America integrated internationally through migration…
-but rural labour markets less well connected to urban core
-limited mechanization ->Low agricultural productivity
-Landowners politically important, prefer coercion to deal with scarcity than raising wages
highlights structural issues that hinder economic growth
How do institutions affect L.A development?
Factor endowments in Colonial Latin America: abundant resources, indigenous labour
Economic conditions at colonization -> institutions
Institutions -> distribution of economic and political rights
Migration restrictions -> First European colonists form the elite
How did the institutions in L.A favour the elite?
-Dominant elites could “lock-in” their advantages through institutions
-political participation, schooling
-Limit potential for broader development
Link between enfranchisement (right to vote) and education?
Positive link to enfranchisement and education,
-high in America around or below half are literate in SA (elite is not interested if majorly in power),
-linking to low productivity as human capital is low
Do institutions explain the inequality in Latin America?
-does not fit in patterns of 19th century e.g. Argentina
