Don't Cry For Me Argentina
There is a saying among economists that goes as follows: "throughout history there have only been four kinds of economies in the world: advanced, developing, Japan, and Argentina". Around 1900 Argentina was among the top five countries in the world in terms of income per capita. Today, Argentina is close to the average country in the world, with income per capita at only 40% of the 12 core EU countries! What has happened? Why this sudden reversal of fortune? Argentina is unique in that it started relatively rich and has ended up being comparatively poor. What explains the Argentina paradox? This is the question addressed by Alan Taylor in a recent NBER paper. He argues that there isn't a monocasual explanation for this reversal and that economists really need to grapple with the Argentina paradox.