Economists have long maintained that a well-developed and functioning financial system is a vital prerequisite to economic growth. Countries with robust banking sectors and securities markets--that is, countries in which credit cards, loans, mortgages, and the ability to issue stocks and bonds are available to a broad swath of consumers and businesses--are more prosperous than countries that restrict such access to a favored elite. What is less clear is why some countries develop better financial systems than others. The essays in this volume employ the insights and techniques of political science, economics, and history to provide a fresh answer to this question. While scholarly tradition points to the colonial origin of a country's legal system as the most important determinant of the health of its financial system, this volume points instead to a country's political institutions--its governmental structures and the rules of the political game--as the key. Specifically, the openness and competitiveness of a country's political system tends to reflect itself in the openness and competitiveness of its financial system.

Until the last decades of the nineteenth century, Mexico faced the twin problems of chronic political instability and slow economic growth. During the period of the Porfirio Diaz dictatorship (1876-1911), however, a series of institutional reforms reignited growth and created rents that enabled the Diaz government to threaten its opponents with military force or to buy them off.
These institutional reforms came out of distinctly political processes, which often had to be brokered among multiple groups of economic elites and regional political bosses. Therefore, they were often structured to encourage investment by specifying property rights or creating streams of rents for particular entrepreneurs. In short, Porfirian Mexico is an excellent natural laboratory in which to investigate not only how institutional change can foment economic growth, but also how specific features of political institutions give rise to specific economic institutions that have both positive and negative effects on growth and distribution.
In fact, the distributional consequences of the Porfirian regime gave rise to the Mexican Revolution of 1910-1917, which produced a further round of dramatic changes in Mexico's political institutions. These changes, in turn, restructured the institutions that governed property rights and those that determined the allocation of rents generated by property rights. This book aims both to identify the crucial institutions and to measure their economic effects.
In addressing these issues, the contributors to this volume employ theoretical insights from the New Institutional Economics and statistical hypothesis-testing as well as traditional archival methods. Thus, in addition to advancing the field of Latin American economic history by studying the interaction of political and economic institutions during the period 1870-1930, the book also makes a methodological contribution by using analytic tools not previously employed in the literature.

This detailed economic history of Mexico advances a theory about how rent seeking permits economic growth. The book explains why political instability is not necessarily correlated with economic stagnation. It addresses the puzzle of growth amidst instability by combining analytic tools and theoretical insights from history, political science and economics. This study is for historians of Latin America, scholars interested in economic development, and political scientists interested in the political foundations of growth.

In 1800, the per capita income of the United States was twice that of Mexico and roughly the same as Brazil's. By 1913, it was four times greater than Mexico's and seven times greater than Brazil's. This volume seeks to explain the nineteenth-century lag in Latin American economic development.
The essays break with longstanding dependency traditions in Latin American historiography that focus on foreign influences to explain Latin American underdevelopment. Instead, they apply the approaches and methods of the New Economic History--which encompasses a wide arsenal of analytic tools and quantitative techniques informed by neo-classical economic theory--arguing that the causes for Latin America's laggard economic growth in the nineteenth century had far more to do with internal political and legal structures than putative external dependency.
The volume is marked by geographical and topical diversity. Four essays deal with Mexico, two with Brazil, and two compare the two countries. Topically, two essays present overviews of nineteenth-century economic performance, two deal with the impact of independence, two deal with capital markets, and the remaining three address regional growth, the impact of railroads, and the economic effects of "culture." The editor's introductory essay surveys the history of economic growth theories and Latin American economic historiography.

This book brings together a number of previously published articles by Stanley L. Engerman and Kenneth L. Sokoloff. Its essays deal with differences in the rates of economic growth in Latin American and mainland North America, specifically the United States and Canada. It demonstrates how relative differences in growth over time are related to differences in the institutions that developed in different economies. This variation is driven by differences in major institutions - suffrage, education, tax policy, land and immigration policy, and banking and financial organizations. These factors, in turn, are all related to differences in endowments, climate and natural resources. Providing a comprehensive treatment of its topic, the essays have been revised to reflect new developments and research.

Economists have long maintained that a well-developed and functioning financial system is a vital prerequisite to economic growth. Countries with robust banking sectors and securities markets - that is, countries in which credit cards, loans, mortgages, and the ability to issue stocks and bonds are available to a broad swath of consumers and businesses - are more prosperous than countries that restrict such access to a favored elite. What is less clear is why some countries develop better financial systems than others. The essays in this volume employ the insights and techniques of political science, economics, and history to provide a fresh answer to this question. While scholarly tradition points to the colonial origin of a country's legal system as the most important determinant of the health of its financial system, this volume points instead to a country's political institutions - its governmental structures and the rules of the political game - as the key. Specifically, the openness and competitiveness of a country's political system tends to reflect itself in the openness and competitiveness of its financial system.

Until the last decades of the nineteenth century, Mexico faced the twin problems of chronic political instability and slow economic growth. During the period of the Porfirio Diaz dictatorship (1876-1911), however, a series of institutional reforms reignited growth and created rents that enabled the Diaz government to threaten its opponents with military force or to buy them off.
These institutional reforms came out of distinctly political processes, which often had to be brokered among multiple groups of economic elites and regional political bosses. Therefore, they were often structured to encourage investment by specifying property rights or creating streams of rents for particular entrepreneurs. In short, Porfirian Mexico is an excellent natural laboratory in which to investigate not only how institutional change can foment economic growth, but also how specific features of political institutions give rise to specific economic institutions that have both positive and negative effects on growth and distribution.
In fact, the distributional consequences of the Porfirian regime gave rise to the Mexican Revolution of 1910-1917, which produced a further round of dramatic changes in Mexico's political institutions. These changes, in turn, restructured the institutions that governed property rights and those that determined the allocation of rents generated by property rights. This book aims both to identify the crucial institutions and to measure their economic effects.
In addressing these issues, the contributors to this volume employ theoretical insights from the New Institutional Economics and statistical hypothesis-testing as well as traditional archival methods. Thus, in addition to advancing the field of Latin American economic history by studying the interaction of political and economic institutions during the period 1870-1930, the book also makes a methodological contribution by using analytic tools not previously employed in the literature.

"This book brings together a number of previously published articles by Stanley L. Engerman and Kenneth L. Sokoloff. Its essays deal with differences in the rates of economic growth in Latin American and mainland North America, specifically the United States and Canada. It demonstrates how relative differences in growth over time are related to differences in the institutions that developed in different economies. This variation is driven by differences in major institutions - suffrage, education, tax policy, land and immigration policy, and banking and financial organizations. These factors, in turn, are all related to differences in endowments, climate, and natural resources. Providing a comprehensive treatment of its topic, the essays have been revised to reflect new developments and research"--

This book addresses two questions that are crucial to understanding Mexico's current economic and political challenges. Why did the opening up of the economy to foreign trade and investment not result in sustained economic growth? Why has electoral democracy not produced rule of law? The answer to those questions lies in the ways in which Mexico's long history with authoritarian government shaped its judicial, taxation, and property rights institutions. These institutions, the authors argue, cannot be reformed with the stroke of a pen. Moreover, they represent powerful constraints on the ability of the Mexican government to fund welfare-enhancing reforms, on the ability of firms and households to write contracts, and on the ability of citizens to enforce their basic rights.

This book addresses two questions that are crucial to understanding Mexico's current economic and political challenges. Why did the opening up of the economy to foreign trade and investment not result in sustained economic growth? Why has electoral democracy not produced rule of law? The answer to those questions lies in the ways in which Mexico's long history with authoritarian government shaped its judicial, taxation, and property rights institutions. These institutions, the authors argue, cannot be reformed with the stroke of a pen. Moreover, they represent powerful constraints on the ability of the Mexican government to fund welfare-enhancing reforms, on the ability of firms and households to write contracts, and on the ability of citizens to enforce their basic rights.

This book addresses a puzzle in political economy: why is it that political instability does not necessarily translate into economic stagnation or collapse? In order to address this puzzle, it advances a theory about property rights systems in many less developed countries. In this theory, governments do not have to enforce property rights as a public good. Instead, they may enforce property rights selectively (as a private good), and share the resulting rents with the group of asset holders who are integrated into the government. Focusing on Mexico, this book explains how the property rights system was constructed during the Porfirio Diaz dictatorship (1876-1911) and then explores how this property rights system either survived, or was reconstructed. The result is an analytic economic history of Mexico under both stability and instability, and a generalizable framework about the interaction of political and economic institutions.

Political Institutions and Economic Growth in Latin America offers a new contribution to the literature on institutions and growth through the analysis of historical cases of institutional change and economic growth in Latin America in the nineteenth and twentieth centuries.