Regional value added in Uruguay during the First Globalization (1872-1908): decreasing inequality and convergence

Abstract

We present estimates of regional GDP in Uruguay during the First Globalization (from the 1870s to the years prior to the World War I). Our results show a decreasing and irregular trend in the regional inequality which is consistent with a process of income convergence between provinces. The irregularity of the trajectory would be evidence of the performance of centrifugal and centripetal forces that alternated influences during the period. The forces that tended to decentralize production were the combination of abundant natural resources suitable for livestock production throughout the territory and the reduction of transport costs that made easy access to Montevideo possible, as well as, through its port, to the global market. Centripetal forces would have responded to a process characterized by the increasing importance of Montevideo as an urban and administrative center, a huge market for goods and services and a dynamic centre of labour market. In addition, in Montevideo, commercial and financial activities (and their potential for making industrial development more flexible) were increasingly important, interrupted only by the economic and financial crisis of 1890-1891. In fact, the crisis constituted one of the main equalizing forces of the period. The result was that at the