Abstract

The dramatic decline of Argentina in the world income distribution during the twentieth century poses a major puzzle in the historical growth literature. This exceptional case of divergence is usually interpreted as the result of a failed transition from a successful agrarian export economy into a high-productive industrial economy, but explaining this failure is not that straightforward. We study the development of industrial labour productivity in Argentina in comparison to Australia to obtain more insight into the timing of this failed transition. We estimate that Argentina’s industrial productivity was circa 15 per cent lower than Australia’s on the eve of WWI, and that productivity levels diverged continuously thereafter up to the 1970s, with the exception of the 1940s. Our tentative explanation focuses on the role of political elites serving the oligopoly interests of a handful of well-connected entrepreneurs, in contrast to the deliberate efforts of consecutive Australian governments to promote broad-based industrialisation via targeted fiscal reforms, educational investments and social policies.