Unit V: Big push or big grab (Bignon) Flashcards
What was the main argument of the article regarding government revenues and railway development in Latin America?
There was a positive two-way relationship between government revenues and railway development in Latin America between 1865 and 1913.
Why were railways crucial for the Latin American trade boom during 1865-1913?
Railways were crucial due to a lack of alternative transport infrastructure.
What financial support did railway construction often require?
Railway construction often required financial support from local governments.
Fill in the blank: The two-way feedback loop created by railway expansion facilitated trade growth, which in turn increased government revenues, enabling further _______.
railway development
What was identified as crucial for both railway construction and export expansion during this era of globalization?
Building state capacity
What contributed to the uneven development of railway networks across Latin America?
Differences in government financial capacity to support such projects.
What role did foreign investment play in railway financing?
Foreign investment was a significant source of financing, attracted by institutional stability and potential export profits.
True or False: The dependence on government resources for railway development can be explained by ‘big push’ models.
True
How did economic shocks and crises impact railway investment?
Economic shocks and crises could significantly hinder railway investment.
What does the study suggest about some Latin American countries regarding development?
Some countries may have been caught in a low-development trap with limited trade and railway infrastructure.
What model did the research use to test the bidirectional causality between government revenues and railway development?
A two-equation model with instrumental variables.
Fill in the blank: The article’s empirical tests found supportive evidence for a positive two-way _______.
relationship
What were railways indispensable for in several export sectors?
The growth of several export sectors such as saltpetre in Chile, coffee in Brazil, and sugar in Cuba.
What was the average unit price of pre-railway freight compared to railway freight?
7 to 13 times higher in some countries.
What was the impact of the completion of the Santiago-Valparaiso line in Chile?
It was only achieved after the government joined the shareholder capital.
What was a significant reason for the delay in railway construction in Mexico before the Porfiriato?
The lack of central governments’ resources.
What form did railway subsidies often take?
Interest guarantees and fixed construction subsidies per mile.
What could insufficient transport infrastructure hinder?
Trade expansion, limiting government revenues for railway building.
What was the relationship between state capacity and railway expansion?
The build-up of state capacity was necessary for railway expansion and export growth.
What does the study indicate about short-term shocks to government revenues?
They had long-term effects on railway expansion and export growth.
Fill in the blank: The mutual causation between railways and government resources could generate multiple _______.
equilibria
What does the study highlight about government intervention in infrastructure development?
It was crucial for economic growth in Latin America.
What were the three main origins of railway capital in Latin America?
- Governments
- Domestic capitalists
- Foreign firms
What did the study conclude about the relationship between government revenues and railway development?
There was a significant positive two-way relationship.
How did the reliance on import tariffs for government revenue affect railway investment during export crises?
It made railway investment vulnerable to export crises.
What are the three main factors influencing railway expansion in Latin America?
The degree of institutional stability, governments’ financial capacity to subsidise the railway system, and the growth of exports with increasing world demand.
Institutional stability reduces uncertainty for investors, financial capacity enables direct support, and export growth promises profitability for railway lines.
What drove the early construction of railways in Cuba?
The sugar boom, without government support.
Construction stagnated in the 1860s and only accelerated again after independence when subsidies were granted.
How could foreign railway promoters affect smaller republics in Latin America?
They could lead to unequal relationships with governments, resulting in excessively generous contracts and increased need for government resources.
This was often to attract investment or to compensate for unfavourable terms.
What are redistribution effects in the context of railway development?
Changes in land prices and market integration that shift income between regions and industries, harming local economic rents through increased competition.
Governments needed political skills and resources to gain approval from affected local elites.
What was the ‘guaranteed dividend policy’ in Brazil?
A policy that attracted railway investments that the country had previously failed to secure.
The social rates of return on these investments were significantly higher than the private ones.
How did export crises impact government support for railways?
They endangered governments’ ability to continue supporting railway construction through subsidies or guarantees.
Governments heavily relied on import tariffs for revenue.
What is the double feedback effect related to railway construction?
Railway construction facilitated export growth, leading to increased government revenues, enabling further railway development.
This suggests that insufficient railway development could lead to low-growth equilibrium.
What is fiscal capacity?
The ability of a government to generate sufficient revenue to fund its expenditures.
Often achieved through taxation or other means.
Define ‘multiple equilibria’ in economic theory.
A situation where there can be more than one stable state or outcome for an economy, depending on initial conditions and feedback loops.
What does state capacity refer to?
The ability of a government to effectively implement its policies, enforce laws, collect taxes, and provide public goods.
What is export-led growth?
An economic development strategy that focuses on expanding exports as the primary engine for economic growth.
What is social savings?
A measure of economic benefits derived from new technology or infrastructure by calculating the difference in costs compared to the next best alternative.
What was the Baring Crisis of 1890?
A financial crisis triggered by the collapse of Barings Bank, impacting Latin America’s access to international capital.
What are terms of trade?
The ratio of a country’s export prices to its import prices, indicating the purchasing power of its exports.
What is sovereign default?
The failure of a government to meet its debt obligations.
What is exogeneity in econometrics?
A variable is exogenous if it is not determined by other variables in the model and is not correlated with the error term.
What does endogeneity mean?
A variable is endogenous if it is determined by other variables in the model or is correlated with the error term.
What are instrumental variables (IV)?
Variables used to address endogeneity by finding those correlated with the endogenous variable but not with the error term.
What is the Two-Stage Least Squares (2SLS) technique?
An econometric method used to estimate parameters in models with endogenous variables using instrumental variables.
Define panel data.
A dataset containing observations on multiple entities over multiple time periods.
What are fixed effects in econometrics?
An econometric technique used with panel data to control for unobserved, time-invariant characteristics.
What is the gravity model in economics?
A model predicting the volume of trade between two countries based on their economic size and the distance between them.
What does cointegration indicate?
A statistical property indicating that a collection of time series variables share a long-run equilibrium relationship.
What is Pooled Mean Group (PMG) Estimation?
A method for estimating dynamic panel data models allowing short-run coefficients to vary across groups while imposing common long-run coefficients.
What role did railways play in the Latin American trade boom before 1914?
They provided the cheapest means for transporting freight inland, crucial for exploiting and exporting natural resources.
How did government involvement influence railway construction in Latin America?
It provided necessary financial backing due to substantial investment needs and limited alternative funding sources.
Why did railway development vary across Latin American countries?
Factors included institutional stability, financial capacity to provide subsidies, and export growth driven by global demand.
Who were the main investors in Latin American railways over time?
Initially governments and domestic capitalists; later, foreign firms became the dominant source of capital, especially after the 1880s.
What challenges were associated with foreign investment in railway development?
Foreign companies held considerable power, leading to generous contracts, and governments often faced corruption and financial constraints.
Did government intervention in railway development have a positive or negative impact?
While it may have led to inefficiencies, the positive effects on transport systems likely outweighed the negatives.
How were government revenues and railway development interconnected?
There was mutual causation; railway development generated government revenue while revenues were necessary for financing railway construction.
What are the main conclusions regarding government activism, railways, and export growth?
A strong two-way relationship exists between government revenues and railway development, with state capacity necessary for both.
