Productivity Gains? First draft

During the last five decades, the Uruguayan economy faced a changing macroeconomic environment and had to adjust to a variable set of economic policies. They range from high controls to capital flows, exchange rates and interest rates to the introduction of a high degree of financial liberalization; from periods of high inflation to recurrent efforts to stabilise price movements; from heavy intervention of the public sector in a variety of economic activities including price controls to deregulation of many of those activities; and from high restrictions to international trade to the implementation of unilateral reductions of barriers to trade and to the effort to create a custom union with the neighbours countries. Something went wrong with economic policy in Uruguay during that period. After being one of the most developed nations in the world by the middle of the century, both in terms of per capita income and other social indicators, five decades of very low growth carried Uruguay to be part of a less selected club, that of the less prosperous nations between the middle-income countries. According with the data from the Penn World Table (Summers and Heston, 1991), in 1955 Uruguay’s annual Gross Domestic Product (GDP) per capita was US$ 4.285 (in 1985 international prices), a 44 % from United States ’ GDP per habitant, not too distant from that of France (US $ 4.770 per capita) and higher than that of Austria and Italy. In 1998, according with the same source, Uruguay’s GDP per capita grew t