Un Siglo De Crecimiento En Latino America

Journal of Development Economics 92 (2010) 232–243

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Journal of Development Economics
j o u r n a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / e c o n b a s e

A century of economic growth in Latin America☆
Pablo Astorga 1
Oxford Economics, Abbey House, Carfax, Oxford, OX1 1HB, United Kingdom Instituto Figuerola, UniversidadCarlos III, C/ Madrid, 126, 28903 Getafe, Madrid, Spain

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This paper makes a contribution to the study of economic growth in developing countries by analyzing the six largest Latin American economies over 105 years within a two-equation framework. Confirming previous findings, physical and human capital prove to be key determinants of GDP per head growth.However, a more controversial result is an overall negative conditional correlation between trade openness and GDP per head growth — though openness has a positive link via investment. The evidence also shows that macroeconomic instability has been a drag on long-term growth in the region. © 2009 Elsevier B.V. All rights reserved.

Article history: Received 29 September 2008 Received in revisedform 29 January 2009 Accepted 29 January 2009 JEL classification: F43 N26 O11 Keywords: Economic growth Investment Openness Latin America

1. Introduction The last two decades have witnessed the proliferation of multicountry studies, which, on the one hand, focus on the connection between trade openness and economic growth and, on the other, explore the role of macroeconomic stability in theaccumulation of capital. These inter-related themes have been a recurrent concern for both academics and policymakers in Latin America, and are of particular relevance at present when policy debates in the region again centre on whether to join the new wave of globalization or to pursue a revival of the old inward-looking development strategy. The pro-market reforms of the 1980s and 1990s wereinstrumental in putting an end to endemic macroeconomic instability, by advancing export diversification and strengthening fiscal and monetary discipline. However, the promise of a new period of high and sustained economic growth in more open and competitive economies has yet to materialize.2 The openness debate remains very much alive, particularly after Rodríguez and Rodrik (2001) found in an influentialcritical study that, despite previous research claims asserting a positive link between

☆ This paper benefited from comments by Leandro Prados, Antonio Tena, Leonardo Vera, two anonymous referees and, specially, Valpy FitzGerald. E-mail address: pastorga1@gmail.com. 1 Senior Economist at Oxford Economics and Associate Researcher at Instituto Figuerola. 2 We limit our references to those studiesthat are more relevant to our aims. For an overview of the economic history of the region in the XXth century see Thorp (1998). 0304-3878/$ – see front matter © 2009 Elsevier B.V. All rights reserved. doi:10.1016/j.jdeveco.2009.01.008

openness in trade policy and economic growth based on data from for the second half of the last century, there was little conclusive evidence to support suchclaims.3 For instance, Harrison's (1996) extensive review of empirical work in this area prior to 1992 reports a generally positive association between openness measures and growth but also warns that these results are sensitive to changes in specification (e.g., the inclusion or omission of macroeconomic stability variables) and on the choice of time-aggregation. Meanwhile, in a study concentratingon developing countries during the period 1970–1997, Yanikkaya (2003) shows that there is no simple and straightforward relationship between openness and economic growth and that it depends on the type of measure used (e.g., whether trade intensity ratios or trade barriers). And closer to home, De Gregorio (1992) in a work analyzing twelve Latin American countries over the period 1950–1985 found...