Microeconomic adjustments in Argentina during 1976-1981: The importance of changing levels of financial subsidies

A. Humberto Petrei, James Tybout

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

This paper uses the financial statements of Argentine industrial firms to study the micro level impact of recent liberalization and reform attempts. The main lesson is that extremely large subsidies were provided to the industrial sector by way of negative effective financial costs. These negative costs appeared first in the late 1970s because of real currency appreciation and unconstrained access to foreign credit, then again in 1981 because of an exchange insurance program. We also find that the Argentine Government's announced intention to promote exporting activities did not translate into relatively favorable product market conditions for exporting firms. To the contrary, the real currency appreciation squeezed exporters' profits while redundant tariff protection insulated import competing firms from world competition, at least until 1980.

Original languageEnglish (US)
Pages (from-to)949-967
Number of pages19
JournalWorld Development
Volume13
Issue number8
DOIs
StatePublished - Aug 1985

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Development
  • Sociology and Political Science
  • Economics and Econometrics

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