The Long-Run Effects of the Hacienda System on Inequality: Evidence from Mexico

• In Event: The Historical Political Economy of Inequality and Clientelism

Abstract

How do political institutions contribute to inequality? We examine the long-run impacts of the hacienda system – a land-grant and forced labor system implemented by the Spanish – on income inequality in Mexico today. We propose two mechanisms through which the hacienda system could shape outcomes today: (1) The economic structure of the hacienda system as an indentured labor system may have shaped the initial distribution of resources that have persisted over time. (2) Hacendados’ political participation in local government may have resulted in social policies and programs that favored landowners over laborers. To test our theory, we use historical land and post office registries to construct an original data set of the location of haciendas in 19th century Mexico. We expect to find that areas with more historical haciendas experience higher levels of income inequality and more exclusive institutions today compared to areas with fewer historical haciendas. However, it could be the case that haciendas were established in areas that were more likely to be unequal in the 19th century, as well as today. We therefore instrument for haciendas using soil quality, an exogenous determinant of hacienda location, to mitigate endogeneity concerns. Our study makes an important contribution to the literature on the institutions hypothesis by introducing original micro-data from the hacienda system and by shifting our theoretical focus from growth to inequality.

Authors

• Hannah Landel

• Lindsay R. Dolan, Wesleyan University