Technological change and productivity growth in the agrarian systems of New Zealand and Uruguay (1870-2010)

Abstract

New Zealand and Uruguay were typical settler economies and were alike in many ways throughout their histories but there were also big differences in how they developed. They were similar as regards size of population, surface area, markets, natural resource endowments, production and trade specialization patterns and the fact that they both attained high levels of income per capita in the early 20th century. They differed in that they had divergent patterns of economic growth and different agricultural productivity growth rates for their main products (wool, meat, dairy produce and leather), which accounted for around 70% of their exports in the hundred years from 1870 to 1970. The main aim of this paper is to use a systematic case-oriented comparison and the evolutionary theoretical approach to technological change to understand the development of the technological trajectories that boosted productivity in the two countries’ pastoral systems in the long-term (1870-2010). I will analyse this in interaction with geographical environment, intensity of resource use (extensive or intensive) and the institutional environment in which technological innovations to raise land productivity were produced, disseminated and adapted. My main results show that in the 19th century Uruguay had more favourable conditions for pastoral production than New Zealand and, up to the 1930s, higher production volumes per hectare. New Zealand had higher growth rates in all livestock physical productivity indicators from 1870 to 1970 and overtook Uruguay’s levels by the mid 20th century. As regards increased land productivity, New Zealand changed completely from an extensive to an intensive pastoral system. This process required technology to improve the soil, thus increasing capital and job investment and changes to the original production function of the pastoral system. In Uruguay livestock rearing was based on natural pasture, extensive production systems and low capital investment, and this stable model remained the same for a relatively long time. This inertia meant that in the long run Uruguay’s technological trajectory lagged far behind New Zealand’s in the development of soil-improvement technologies. I argue that these differences have, through different channels, conditioned the export performance and the economic growth of both countries