Labor Scarcity, Land Tenure, and Historical Legacy: Evidence from Mexico
Abstract: How does labor scarcity impact institutional development? We examine the long-term institutional impacts of Mexico's 16th-century demographic collapse, which reduced the indigenous population by between 70 and 90 percent. We show that the collapse facilitated land concentration by the elite and the rise of a landowner class that dominated Mexican political economy for centuries. Though land institutions were transformed after the Revolution of 1910, the 20th-century agrarian reform was concentrated in areas experiencing a steeper population decline between 1570 and 1650. Disease-impacted areas now have more land in common-property institutions with limited property rights. The collapse thus had a persistent impact on the political economy of the country, but the nature of this impact has changed radically over time. Our identification strategy exploits climatic shocks associated with an epidemic in the 1570s that roughly halved the indigenous population. We discuss the implications of our findings for the study of the institutional impacts of population scarcity and historical persistence and change.