| This thesis concerns various aspects of economic growth in the Third World using historical evidence from eighteenth and nineteenth century Mexico. Economists and historians believe that economic stagnation dominated the last decades of colonialism in Mexico, just before the start of the independence war. Chapter 1 explores the plausibility of a Dutch Disease case in late colonial Mexico. Dutch Disease is a case in which a boom in primary exports fails to stimulate development. Late colonial Mexico accomplished a boom in its main export, silver, and it was accompanied by an increase in the price of non-tradables. I argue that tax incentives in the late 1760s and the Free Trade Agreement of the late 1780s caused the export boom. I study a trade model in which these policies generate an increase in exports and a rise in the price of non-tradable goods. Using data on government income, I estimate an index of total output for the late colonial period. I find mixed evidence of a slowdown in economic growth after the export boom.; Chapter 2 studies the connection between globalization and economic growth in eighteenth-century Mexico. This was a period of globalization in Mexico, characterized by market integration and growth in international trade. I estimate economic growth at that time and explore its relationship with the dominant export of the epoch, silver. The results show that Mexico experienced rapid economic growth in the eighteenth century and, furthermore, that exports caused that growth. During the period of Bourbon reforms, economic growth improved, but not sumptuously. Mining ceased to be the engine of growth by the end of the century.; Chapter 3 studies the connection between economic growth and political instability during the most turbulent period in Mexican history, the post-independence period in the nineteenth century. Political instability implied policy uncertainty, no public programs for development, but most important, violence, lack of property rights, and other forms of disorder that led to risk of loss for economic actors. Political differences were based on ideological disagreement among political agents. I measure political instability by a combination of four variables: changes in the executive post; internal wars; number of parallel governments; and most importantly, foreign wars. The evidence is very strong. There is a negative link between political instability and growth. The result is robust to different control variables, equation dynamics, estimation methods, and growth measurements. I show that between 50 and 100 per cent of the decline in the growth rate during the four or five "lost decades" after independence can be attributed to political instability. And furthermore, political stability is responsible for about 50 to 88 per cent of the increase in the growth rate during the Belle Epoque. And most important, there is no systematic difference in the growth rate after 1867 when I control for political stability. Political instability is the single most important factor in explaining why Mexico lagged behind during the nineteenth century. |
