The Puzzle of Argentine Divergence: Institutions, Innovation, and Path Dependence, 1880-1930

Argentina’s economic trajectory between 1880 and 1930 represents a striking case of developmental divergence. Despite achieving world-leading per capita growth rates and ranking among the richest nations by 1913, the country failed to sustain this momentum, unlike its settler-economy peers Canada and Australia. This article examines the underlying causes of this long-run divergence through an evolutionary and institutional framework that integrates path dependence, resource structures, and political economy. The analysis highlights how the unique characteristics of the Pampas—highly fertile, easily exploitable, and controlled by a concentrated landed elite—combined with Spanish colonial institutional legacies to create a pattern of weak linkages, limited incentives for technological upgrading, and entrenched rent-seeking. In contrast, Canada and Australia, endowed with more diverse resources and embedded in British institutional traditions, developed stronger linkages, broader political coalitions, and greater incentives for industrial diversification and innovation. Using comparative historical analysis and mixed evidence, the study traces how initial conditions, structural evolution, political economy and agent behaviour interacted in self-reinforcing, path-dependent ways. The findings demonstrate how institutional and structural configurations can lock economies into suboptimal trajectories, underscoring the importance of innovation incentives, diversity of resources, and pluralistic institutions for long-run resilience and development. JEL : B15; B52; F63; L26; N16; O33; O38; O47; O57