🤖 AI Summary
This study reevaluates the actual impact of the U.S. embargo on post-revolutionary Cuba’s per capita income divergence, challenging prior findings that downplay the embargo’s role. By revising the parameterization of trade openness elasticity with respect to income and adopting elasticity values and interaction effect decomposition methods more consistent with the scholarly consensus, the analysis integrates counterfactual reasoning with econometric techniques to reassess the relative contributions of the embargo and other growth determinants. The results indicate that the U.S. embargo accounts for a substantial share of Cuba’s underperformance since 1959 and, under certain scenarios, is sufficient to fully explain its persistent economic lag, thereby significantly enhancing the explanatory power attributed to the embargo.
📝 Abstract
Bastos, Geloso, and Bologna Pavlik (2026) argue that the US embargo explains less than one tenth of the difference in per capita income between Cuba and a counterfactual scenario in which the country did not follow socialist economic policies. We show that their results are driven by the use of an elasticity of income to trade openness that is neither representative nor a reasonable upper bound of the values found in the literature and by their choice to attribute the effect of the interaction between the embargo and other determinants of growth solely to those other determinants. We show that, once these problems are corrected, the embargo can account for a substantial fraction, and in some cases all, of Cuba's post 1959 economic underperformance.