The Long and Widening Gap: Analyzing Structural Breaks in Argentina’s Economic Decline

During the late 1800s and early 1900s, Argentina was among the ten richest economies in terms of gross domestic product per capita with the United States being the leading economy most of the time. However, Argentina grew less and was less stable than the United States in a period of over 140 years (1875–2018). Structural breaks (1935 and 1975) were identified in the declining ratio of Argentina’s gross domestic product per capita long-term trend to that of the United States, as well as in the long-term per capita growth rates of Argentina (1911 and 1975) and the United States (1935). The declining ratio partly reflects that growth in the United States accelerated after 1935 (during the post-1930 Great Depression recovery and the Second World War years) while it decelerated in Argentina after 1975 (in the context of large government deficits, high inflation, the first oil crisis, and the Latin American debt crisis). A Bayesian estimation model suggests that long-term growth was generally higher and less volatile in the United States than in Argentina, with relatively low spillovers from one country to the other.