Real wages inequality and globalization in Latin America before 1940

La Historia Económica en Latinoamérica. Edición a cargo de Pablo Martín Aceña, Adolfo Meisel, Carlos Newland.Editada en la Fundación Empresa PúblicaHacia 1914 existían notables diferencias económicas entre los países del Cono Sur y Cuba y el resto de América Latina. El artículo indaga las razones de estas diferencias, cuando aparecieron, así como la distancia existente entre los países latinoamericanos, los de la cuenca mediterránea y el líder industrial. Se ocupa de examinar el papel que desempeñaron las fuerzas demográficas, la localización geográfica y el grado de globalización e integración económica. El trabajo utiliza nuevos datos de salarios reales y precios relativos de los factores de siete países latinoamericanos y de tres regiones mediterráneas. Estos datos se comparan con la información disponible para Gran Bretaña y los Estados Unidos.By 1914, there were huge economic gaps between the Soutbem Cone plus Cuba and the rest of Latin America. Can they be explained by the varying ability of these countries to exploit the first great globalization boom afier about 1870? Or did the gaps appear much earlier? And what about the gaps between Latin America and the Mediterranean, let alone with industrial leaders like Britain? What role did geographic isolation, globalization and demographic forces play in the process? Conventional GDP estimates are much too coarse to confront these questions. This essay uses a new data base on real wages and relative factor prices for seven Latin American and three Mediterranean regions, the latter being a source of so many of immigrants for the former. These ten regions, plus comparative information firom Britain and the United States, form the data base for the paper.Publicad

The Impact of Globalization on Pre-Industrial, Technologically Quiescent Economies

This paper uses a new pre-1940 Third World data base documenting real wages and relative factor prices to explore their determinants. There are three possibilities: external price shocks, factor endowment changes, and technological change. As the paper's title suggests, technological change is an unlikely explanation. The paper lays out an explicit econometric agenda for the future, although more casual empiricism suggests that external price shocks were doing most of the work, and declining-transport-cost-induced commodity price convergence in particular. Real wages in Asia, the Middle East, and Latin America never showed any signs of catching up with the European industrial leaders prior to 1914 hold their own. The ratio of wages to land rents, on the other hand, declined up to World War I and so did the ratio of wages to GDP per capita. The trend reversed thereafter. These relative factor price movements help sharpen our understanding of the sources of growth (or lack of it) in Asia and Latin America prior to 1940. They also offer strong hints about changes in income distribution there.

Demographic shocks and global factor flows

How economists view the impact of demography on economic events has changed a great deal over the past decade or so. When, in the late 1980s, Allen Kelley (1988) was writing his magisterial survey on the economic consequences of population growth in the Third World, the conventional wisdom was that Malthus did not matter much. Furthermore, the focus was on aggregate population growth. Since Kelley's 1988 survey, we have learned two important lessons that should have been obvious then, but were not: First, changes in the composition of the population often matter far more than changes in population aggregates; and second, when it comes to demographic impact, we need to think about long transitions rather than equilibrium steady states. These two lessons have taught us a great deal about the connection between demographic shocks and global factor flows--and even about growth.Demography ; Economic conditions

Globalization, Convergence and History

There were three epochs of growth experience after the mid 19th century for what is now called the OECD 'club'; the late 19th century, the middle years between 1914 and 1950, and the late 20th century. The late 19th and the late 20th century epochs were ones of overall fast growth and convergence: poor countries tended to grow even faster than rich and the economic gap between rich and poor countries diminished. The middle years were ones of overall slow growth and divergence: poor countries tended to grow even slower than rich and the economic gap between rich and poor countries widened. Since the middle years were also ones of economic autarky and 'de-globalization', while the rest were ones of increasing globalization in world commodity and factor markets, history offers an unambiguous positive correlation between globalization and convergence. But is the correlation spurious? When the pre-World War I years are examined in detail, the correlation turns out to be causal: the globalization of commodity and factor markets served to play a critical, perhaps the critical, role in contributing to convergence. A century and a half of OECD club history also suggests that economists should pay more attention to who gains and who loses from convergence since the answers may help determine whether pro-globalization or anti- globalization policies will persist.

Inequality and schooling responses to globalization forces: lessons from history

Given the intensity of the current debate about the impact of globalization on brain drain in the Third World and inequality in the First World, it might be useful to look at these forces during the first global century, ending in 1914. This paper reviews what we know about the impact of trade and mass migration on low-wage, labor-abundant European economies and high-wage, labor-scarce overseas New World economies. It reviews the distribution impact everywhere in the Atlantic economy, the extent of the European brain drain, and the schooling responses in both Europe and the United States.Emigration and immigration ; International trade ; Economic development ; Developing countries ; Human capital ; Globalization ; Education

Inequality and Schooling Responses to Globalization Forces: Lessons from History

In the first global century before 1914, trade and especially migration had profound effects on both low-wage, labor abundant Europe and the high-wage, labor scarce New World. Those global forces contributed to a reduction in unskilled labor scarcity in the New World and to a rise in unskilled labor scarcity in Europe. Thus, it contributed to rising inequality in overseas countries, like the United States, and falling inequality in most of Europe. Falling unskilled labor scarcity and rising skill scarcity contributed to the high school revolution in the US. Rising unskilled scarcity also contributed to the primary schooling and literacy revolution in Europe. Under what conditions would we expect the same responses to globalization in today’s world? This paper argues that modern debates about inequality and schooling responses to globalization should pay more attention to history.

"Globalization and Inequality Past and Present"

The late 19th and the late 20th century shared more than simply globalization and convergence. Globalization also seems to have had the same impact on income distribution: in the late 19th century, inequality rose in rich countries and fell in poor countries; according to Adrian Wood, the same has been true of the late 20th century. Furthermore, while George Borjas and Wood think that globalization accounted for something like a third to a half of the rise in inequality in America and other OECD countries since the 1970s, the late 19th century evidence suggests at least the same, perhaps more. However, those modern economists who favor a rising inequality explanation coming from (unskilled)-labor-saving technological change will be pleased to hear that it probably accounted for more than a third of the rising inequality in the New World and for more than a half of the falling inequality in Europe. It also appears that the inequality trends which globalization produced prior to World War I were at least partly responsible for the interwar retreat from globalization. Will the world economy of the next century also retreat from its commitment to globalization because of its inequality side effects?

Poverty Traps, Distance, and Diversity: The Migration Connection

Within-country ethnic diversity in high-wage immigrant nations is driven by long distance migration. This paper documents the migration-diversity connection for the first global century before 1914 and the second global century after 1950. It distinguishes between ethnic diversity among the foreign-born, between the foreign-born and native-born and for total populations using country-of-birth data. It exploits the polarization index made popular in the recent diversity-growth debate and exploits an emigration life cycle model to predict the connection. It also shows how policy matters.

Distributional impact of commodity price shocks: Australia over a century

This paper explores the distributional impact of commodity price shocks over the both the short and very long run. Using a GARCH model, we find that Australia experienced more volatility than many commodity exporting poor countries between 1865 and 2007. A single equation error correction model suggests that commodity price shocks increase the income share of the top 1, 0.05, and 0.01 percent in the short run. The very top end of the income distribution benefits from commodity booms disproportionately more than the rest of society. The short run effect is mainly driven by wool and mining and not agricultural commodities. A sustained increase in the price of renewables (wool) reduces inequality whereas the same for non-renewable resources (minerals) increases inequality. We expect that the initial distribution of land and mineral resources explains the asymmetric result

Explaining Inequality the World Round: Cohort Size, Kuznets Curves, andOpenness

Klaus Deininger and Lyn Squire have recently produced an inequality data base for a panel of countries from the 1960s to the 1990s. We use these data to decompose the sources of inequality into three central parts: the demographic or cohort size effect; the so-called Kuznets Curve or demand effects; and the commitment to globalization or policy effects. We also control for education supply, the so-called natural resource curse and other variables suggested by the literature. While the Kuznets Curve comes out of hiding when the inequality relationship is conditioned by the other two, cohort size seems to be the most important force at work. We resolve the apparent conflict between this macro finding on cohort size and the contrary implications of recent research based on micro data.