Elite Conflict, Demographic Collapse, and the Transition to Direct Rule: Evidence from Colonial Mexico
Abstract: When do central governments centralize control over their regions? We develop a theory of the transition from indirect to direct rule, focusing on the contentious relationship between a ruler and local potentates, who provide civil order at the expense of a share of local revenue. A rapid fall in the local population reduces the threat of rebellion, as well as the willingness and ability of potentates to resist the ruler’s efforts to centralize power. A demographic collapse thus enables the ruler to replace the potentates with direct agents of the state and invest in a fiscal bureaucracy, with important implications for the development of state capacity. We evaluate the theory using subnational panel data from 16th- and 17th-century Mexico around the time of one of the most dramatic demographic collapses in history. To identify the effect of the collapse on the centralization of fiscal authority, we employ a difference-in-differences empirical strategy and an instrumental-variables approach based on the climatic conditions associated with a series of epidemics that decimated the population during this period. Our results show that the centralization of power occurred faster in areas that experienced a more dramatic loss in population.