Wealth, War and Modernization: Essays in Mexican Economic History
Summary
This doctoral project investigates the evolution of wealth inequality in Mexico, primarily during the 19th century. The individual studies aim to explain how wealth inequality has been affected by wars, the dawn of the Mexican state and structural change.
Researcher: Diego Castañeda Garza
Moderate opulence: the evolution of wealth inequality in Mexico in its first century of independence
This article reconstructs the 19th-century Mexican wealth distribution from independence to the Mexican Revolution, using will inventories/protocols. It estimates historical wealth inequality levels and trends through five methods, including theoretical parametric distributions. Wealth inequality was dominated by the top 1% and middle 40%, while the top 10% and bottom 50% remained stable. The article contributes by reconstructing historical wealth inequality and analyzing its impact within a dynamic political economy.
The article provides the first complete reconstruction of Mexican wealth inequality in the 19th century. It identifies winners and losers across different periods, aiding political economy analysis. It also creates the Mexican wealth distribution database (1810-1910), sheds light on the “censored century” of Mexican history and introduces a dynamic view of wealth inequality in Mexico.
Throughout the 19th century, Mexican wealth inequality appeared steady but varied significantly in sub-periods. Inequality was high but fluctuated, with notable decreases during specific periods. The top 1% of wealth holders drove these dynamics. Military expenditures and the development of a fiscal-military state increased inequality post-independence, while war-related reforms led to equalization. Stability during the Porfiriato ended the pattern of fluctuations, leading to rising inequality. This rising inequality may explain the middle-class discontent that triggered Northern uprisings during the Mexican Revolution, as Katz (1982) suggested.
A Wicked War: War and the Wealth Inequality – Public Debt Nexus
This paper contributes to the ongoing literature on the relationship between warfare and wealth inequality dynamics in the pre-industrial world. As an eminently political event, war impacts inequality as an expression of societal politics. The paper uses an unbalanced panel of wills in a combined event study and instrumental variables research design to explore wealth inequality dynamics in Mexico during the Mexican-American War of 1846-1848. The findings suggest that weak public finances and financial crises increased inequality through military expenditures and national debt. However, the formation of a fiscal-military state and the leveling effect of warfare can coexist; inequality depends on how war is financed and its destructiveness to capital and wealth.
Carl von Clausewitz’s observation that “war always reflects policy” is evident in Mexico’s conduct during the 1846-1848 war, reflecting its fiscal and financial policies. The resulting wealth inequality stemmed from clear political choices. The paper shows that the fiscal-military state and the great leveler arguments coexist. Wealth inequality follows the stronger force at the moment, with destruction and taxing policies countering regressive mechanisms like the transfer effect or military expenditure during emergencies. Modernization of public finances, pacification, and financialization can eventually shift these mechanisms, allowing different inequality forces to drive its evolution.
What we gained that time we lost so much: demographic trends and territorial control in Mexico after the war with the United States
Coauthored with Sergio Silva Castañeda (Bank of Mexico). Accepted for publication in the European Review of Economic History.
This paper highlights demographic dynamics as a crucial force shaping Mexico’s 19th-century narrative, enhancing our understanding of the nation’s historical evolution. By examining the aftermath of American expansion (1846-1848) and the subsequent French intervention, the study shifts focus from traditional state capacity discussions to demographic trends. It reevaluates Mexico’s state formation during the 19th century, revealing the intrinsic role of demographic dynamics. Analyzing population trends at critical junctures, the research illuminates Mexico’s vulnerability during its formative years. The transformation of Mexico’s demographic landscape post-Mexican-American War becomes pivotal, laying the foundation for a more robust state in the face of foreign threats. The shift from a sparsely populated frontier to a strategically controlled border forms the core of this exploration, demonstrating how demographic shifts influenced territorial dominance and state resilience. This paper contributes to a deeper understanding of Mexico’s historical evolution through the lens of demographic dynamics.
This study offers new perspectives that contribute to the state capacity literature. By using demographic trends as a proxy for the accumulation of state capacity, it contributes to the historiographic understanding of the impact of warfare on the formation of the Mexican state.
Life On The Edge: Elites, Wealth And Inequality In Sonora 1871-1910
Coauthored with Alice Krozer (El Colegio de México).
This paper contributes to the discussion on the role of economic and political elites in inequality dynamics and their reproduction over time. Using a sample of wills from the El Colegio de Sonora database (1871-1910) shows that rapid industrialization and modernization in northern Mexico led to increased wealth concentration at the top. The Gini index rose from 0.58 (1871-1885) to 0.80 (1901-1910). The analysis of upper-class wills suggests that political economy and control over natural resources played critical roles in for this development.
The main contributions include pioneering the construction of wealth social tables for Sonora and advancing Mexican historiography by providing a Northern Mexico case for comparison with other regions. The paper introduces new estimates of wealth inequality for 1871-1910, combining quantitative and qualitative approaches to study the political economy of inequality. It explores a period that foreshadows national changes, showing how macroeconomic and individual wealth-enhancing mechanisms led to high wealth concentration. This increase in inequality aligns with Kuznets’ (1955) hypothesis but also reflects Gerschenkron’s (1952) insight that cronyism enabled rapid capital accumulation, modernization of the economy, and the concentration of wealth at the top.
The Sonoran Land Grab Development of Wealth in 19th Century Sonora
Coauthored with William Skoglund (Uppsala University) and Jonatan Andersson (Uppsala University).
This article investigates the effect of late 19th-century encroachment policies on wealth in Sonora, Mexico. Using a novel database of will inventories, it finds that the upper class saw significant wealth gains from access to new agricultural land and irrigation. The study argues that encroachment policies had a substantial but heterogeneous effect on wealth across social groups, highlighting the role of institutions in shaping wealth and inequality in early American economic development.
This article highlights the significant impact of economic institutions on wealth distribution. Extractive institutions, like those in Mexico (1883 Colonization Law), Argentina, and Chile, reveal the costs of non-inclusive development policies: marginalization of Indigenous populations, rising inequality, and violence, which hinder long-term growth. These findings help us understand the development process and its costs in the late 19th and early 20th centuries. Presently, they resonate with developing nations facing similar issues under economic modernization.
Under Revision in Revista de Historia Económica-Journal of Iberian and Latin American Economic History.
Income Inequality in Mexico, 1895–1940: Industrialization, Revolution, Institutions
Coauthored with Erik Bengtsson (Lund University).
Using new archival research and the social tables method, this article estimates income inequality in Mexico for 1895, 1910, 1930, and 1940. Inequality grew from 1895 to 1910 due to economic expansion within an oligarchical political economy, benefiting more prominent landowners and businessmen despite real income growth for the lower classes. From 1910 to 1930, inequality decreased due to land reforms benefiting peasants, but the economic structure remained unchanged. In the 1930s, inequality grew again as peasants’ and informal sector incomes lagged behind manufacturing and high-earning sectors.
Politics, economics, and demography all mattered for Mexican income inequality during the period. The abundant factor of production, unskilled labor, did not benefit more strongly in the 1895 to 1910 liberalization period, likely due to the oligarchic and repressive nature of the political regime, which also led to its downfall in the 1910s. The Revolution, however, made no clean break with history. The old view of the Revolution offering a clean slate no longer has much support among historians. Narrowly agrarian-based elites in states such as Morelos suffered economic losses with the land reforms of the 1920s and 1930s. Still, their local influence did not disappear, and revolutionary regimes depended on negotiation with local elites to stay in power. More important to the inequality patterns measured in 1930 and 1940 is that inequality reduction in Mexico, in times of reform, was held back by the dualism of the economy; the large pool of low-skilled, low-paid, or informally paid labor implied profound inequality between this group and high-paid people in more dynamic sectors. Ironically, Mexico had a revolution with peasant mobilization and peasant-friendly reforms but produced no lasting decrease in inequality, while Chile, with no revolution, significantly reduced inequality from 1940 to 1970. Thus, while the experience of Porfiriato shows that politics, not only economic forces, must be considered in the historical analysis of inequality, the experience of the 1930s shows that even in times of revolution, the fundamental factors of supply and demand of labor must not be disregarded.
Forthcoming in Revista de Historia Económica-Journal of Iberian and Latin American Economic History.
Import Substitution Inequalization? Mexico’s Mesocratic Industrialization 1935-1963
From the 1950s to 1982, Mexico experienced a period of rapid economic growth known as the “Mexican Miracle” or “stabilizing development,” driven by a structural transformation from agriculture to industry. This transformation, rooted in import substitution industrialization (ISI) policies initiated during the 1929 crisis and WWII, became a deliberate government policy from the mid-1940s. Using new ensembled data in a two-way-fixed-effect (TWFE) and staggered difference-in-differences identification strategy, this paper shows that during the booming ISI years (1935-1963), the policy resulted in a mesocratic income distribution, favoring income convergence in industrial sectors and forming a middle class, while leaving the agricultural sector behind, thus increasing overall inequality.
In Mexico, during the golden years of import substitution industrialization, inequality was influenced by economic factors and the political economy of the time. This highlights that economic growth and structural change, while necessary for development, are not without consequences. The winners and losers in economic policy are often shaped by political decisions, emphasizing the need for a nuanced and politically aware approach to development policy. This lesson is particularly relevant in contemporary development discussions, especially with the reconfiguration of manufacturing capacities and phenomena such as nearshoring. Previous industrial policy efforts like ISI resulted in high growth but also higher inequality, underscoring the importance of considering distributional impacts and the role of political decisions in pursuing economic growth and development to maximize the benefits of potential neo-industrial policies.
