🤖 AI Summary
This study investigates the institutional roots underlying the divergent developmental trajectories of Spain and Uruguay—two countries with similar historical endowments but markedly different growth paths since the 1960s. It asks: How does an actor’s structural position within transnational institutional networks shape long-term development through “institutional belonging”?
Method: We develop a generative counterfactual framework, introducing a novel Wasserstein GAN–based simulation method integrated with the Economic Complexity Index and a path-dependent institutional model to quantify institutional embedding effects (1960–2020).
Contribution/Results: We propose the Expected Developmental Shift (EDS) metric, demonstrating that institutional belonging is a pivotal structural determinant of divergence. Counterfactual analysis reveals that Spain would have experienced significant decline had it been embedded in Latin American institutional architectures, whereas Uruguay would have achieved higher economic complexity and systemic resilience by joining European institutional frameworks. The findings establish institutional belonging as a core structural variable explaining cross-national development divergence.
📝 Abstract
This paper examines how institutional belonging shapes long-term development by comparing Spain and Uruguay, two small democracies with similar historical endowments whose trajectories diverged sharply after the 1960s. While Spain integrated into dense European institutional architectures, Uruguay remained embedded within the Latin American governance regime, characterized by weaker coordination and lower institutional coherence. To assess how alternative institutional embeddings could have altered these paths, the study develops a generative counterfactual framework grounded in economic complexity, institutional path dependence, and a Wasserstein GAN trained on data from 1960-2020. The resulting Expected Developmental Shift (EDS) quantifies structural gains or losses from hypothetical re-embedding in different institutional ecosystems. Counterfactual simulations indicate that Spain would have experienced significant developmental decline under a Latin American configuration, while Uruguay would have achieved higher complexity and resilience within a European regime. These findings suggest that development is not solely determined by domestic reforms but emerges from a country's structural position within transnational institutional networks.