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Building Fiscal Capacity in Colonial Mexico: From Fragmentation to Centralization

Published online by Cambridge University Press:  09 August 2013

Luz Marina Arias
Luz Marina Arias*
Affiliation:
Research Fellow, Center for Advanced Studies in the Social Sciences (CEACS), Juan March Institute, Madrid, Spain and Center for Economics Research and Teaching (CIDE), Mexico City, Mexico. E-mail: larias@march.es.
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Abstract

The success of fiscal centralization and military buildup in colonial Mexico contrasts with failed similar attempts elsewhere. Why did powerful elites comply with fiscal-military reforms in eighteenth-century Mexico? I argue that the Seven Years' War provided incentives for the Crown to centralize and elites to comply by accentuating the free rider problems inherent in the provision of military defense under fiscal fragmentation. Fiscal data and history document that reforms were more successful in regions more militarily vulnerable and where benefits were more aligned between the elites and the Crown. Centralization served the elites to commit to collective cooperation.

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The Journal of Economic History , Volume 73 , Issue 3 , September 2013 , pp. 662 - 693
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Copyright © The Economic History Association 2013 

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Footnotes

I am indebted to the editor, two anonymous referees, Avner Greif, B. Douglas Bernheim, Carlos Marichal, Romans Pancs, Ran Abramitsky, David Baron, Paul David, Alberto Díaz-Cayeros, Mark Dincecco, Rafael Dobado, Luis Jáuregui, Yadira Gonzalez de Lara, Steve Haber, Margaret Levi, Alvin Rabushka, Gavin Wright, and the participants at the Social Science and History Workshop at Stanford University, the Workshop on Endogenous Institutions and Political Conflict at UC Berkeley’s Center on Institutions and Governance, and the History and Economic Institutions Seminar at El Colegio de México. This work would have not been possible without the financial support from the Stanford Institute for Economic Policy Research and the John M. Olin Program in Law and Economics, Stanford Law School.

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