Was It Prices, Productivity or Policy? The Timing and Pace of Latin American Industrialization after 1870

Galvarriato, Aurora Gómez; Williamson, Jeffrey G.

doi:10.3386/w13990

Cited by 15 publications

(9 citation statements)

References 28 publications

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“…However, their argument seems to require that the current account be invariant to the real exchange rate, which is contradicted by considerable evidence. See also Galvarriato and Williamson (2008) on the role played by favorable relative prices in the rapid industrialization of Latin American countries such as Brazil and Mexico after 1870, and Freund and Pierola (2008) on the significance of currency undervaluation in stimulating export surges.…”

Section: Understanding the Importance Of The Real Exchange Ratementioning

confidence: 99%

The Real Exchange Rate and Economic Growth

Rodrik¹

2008

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I show that undervaluation of the currency (a high real exchange rate) stimulates economic growth. This is true particularly for developing countries. This finding is robust to using different measures of the real exchange rate and different estimation techniques. I also provide some evidence that the operative channel is the size of the tradable sector (especially industry). These results suggest that tradables suffer disproportionately from the government or market failures that keep poor countries from converging toward countries with higher incomes. I present two categories of explanations for why this may be so, the first focusing on institutional weaknesses, and the second on product-market failures. A formal model elucidates the linkages between the real exchange rate and the rate of economic growth.

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Section: Understanding the Importance Of The Real Exchange Ratementioning

confidence: 99%

The Real Exchange Rate and Economic Growth

Rodrik¹

2008

eca

1,289

103

1,326

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“…There are some important recent exceptions, likeFederico and Tena (1999) on Italy,Lains (2006) on Portugal,Tena (2006) on Spain, Nunn and Trefler (2010) on the 20 th century Third World, and Gómez Galvarriato andWilliamson (2009) on Latin America.…”

mentioning

confidence: 99%

“…In the 1870s, Mexico had a tariff on raw cotton to protect local producers (Gómez Galvarriato andWilliamson 2009).…”

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confidence: 99%

Industrial Catching Up in the Poor Periphery 1870-1975

Williamson

2011

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This paper documents industrial output and labor productivity growth around the poor periphery 1870-1975 (Latin America, the European periphery, the Middle East, South Asia, Southeast Asia and East Asia). Intensive and extensive industrial growth accelerated there over this critical century. The precocious poor periphery leaders underwent a surge and more poor countries joined their club. Furthermore, by the interwar the majority were catching up on Germany, the US and the UK, a process that accelerated even more up to 1950-1975. What explains the spread of the industrial revolution worldwide and this catching up? Productivity growth certainly made their industries more competitive in home and foreign markets, but other forces mattered as well. A falling terms of trade raised the relative price of manufactures in domestic markets, as did real exchange rate depreciation. In addition, increasingly cheap fuel and non-fuel intermediates from globally integrating markets seems to have taken resource advantages away from the European and North American leaders, and integrating world financial markets also reduced the cheap capital advantage of the leaders. However, ever-cheaper labor was not a serious cause of industrial catch up, offering little support for the Krugman-Venables (1995) model. Furthermore, tariffs did not foster industrial catch up either, but rather poor industry performance fostered high tariffs. Markets and policies mattered, not just institutions.

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“…In the 1870s, Mexico had a tariff on raw cotton to protect local producers (Gómez Galvarriato andWilliamson 2009).…”

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confidence: 99%