History with Some Evidence: Inequality Levels of Argentina and Australia at the Turn of the 20th Century

Institutional theory of economic growth argues that the long-term development of a country is greatly influenced by quality of its institutions. On its turn, good institutions would form more naturally in countries with better income distributions than more unequal countries. One of the main references used to support this idea used by researchers is the case of Latin America, especially Argentina. In particular, Engerman & Sokoloff (2000) claim that Latin America (Argentina included) had always had higher inequality than the rest of the world, explaining its poor economic performance in the 20th century. Unfortunately, data on this topic for that period is not abundant nor does it promptly prove without any doubts that inequality in Argentina compared to the rest of the world was high enough to explain Argentina falling behind. By comparing Argentina’s inequality to Australia (a country considered similar to Argentina in the period of the analysis), this study attempts to review the evidence on inequality of the two countries and see if the evidence really supports a higher inequality in Argentina than in Australia and then see if such evidence supports the claims of the institutional theory. The result of such an evaluation of the available evidence points that inequality in Argentina may not have followed the more simplistic story offered by Engerman & Sokoloff, instead the evidence seems to point that Argentina may even have had a more egalitarian distribution of income than Australia at the turn of the century