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The long-run influence of institutions governing trade: Evidence from smuggling ports in colonial Mexico

Author

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  • Alvarez-Villa, Daphne
  • Guardado, Jenny

Abstract

We estimate the long-run impact of historical ports using evidence on legal and contraband trading sites in colonial Mexico (16th to late 18th century). We restrict comparisons to neighboring municipalities and use natural harbors as a source of exogenous variation in the possibility for historical trade. Colonial ports (smuggling and legal ones) led to significantly less poverty, more public goods and greater tax collection in the long run, relative to nearby areas without trade. The long-term effect of trade seems larger in legal ports than in smuggling ones, likely due to early state-enabled agglomeration. In smuggling ports, intermediate outcomes suggest that contraband helped coordinate economic activity, settlement choices, and human capital investments with more liberal trade policies in the 19th century. In the Mexican case, the effect of contraband ports offset their lawlessness, accompanying violence and initial absence of state institutions.

Suggested Citation

  • Alvarez-Villa, Daphne & Guardado, Jenny, 2020. "The long-run influence of institutions governing trade: Evidence from smuggling ports in colonial Mexico," Journal of Development Economics, Elsevier, vol. 144(C).
  • Handle: RePEc:eee:deveco:v:144:y:2020:i:c:s0304387820300286
    DOI: 10.1016/j.jdeveco.2020.102453
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    2. Arteaga, Fernando & Desierto, Desiree & Koyama, Mark, 2024. "Shipwrecked by rents," Journal of Development Economics, Elsevier, vol. 168(C).
    3. Jin, Gan, 2023. "Circle of fortune: The long-term impact of Western customs institution in China," Journal of Development Economics, Elsevier, vol. 163(C).
    4. Yanjun Chang & Liuliu Lai, 2023. "Effects and Mechanisms of China’s Pilot Free Trade Zones on Green and High-Quality Development from the Dual-Circulation Perspective," Sustainability, MDPI, vol. 15(2), pages 1-17, January.
    5. Anastasia N. Nadunja & Tunde Ahmed Afolabi, 2024. "Investigating the Impact of Border Security Measures in Mitigating Smuggling: A Case Study of the Namibia-Angola Border," Journal of Scientific Reports, IJSAB International, vol. 7(1), pages 40-59.

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    More about this item

    Keywords

    Colonial trade; Institutions and growth; Smuggling and contraband trade; Mexico;
    All these keywords.

    JEL classification:

    • N76 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Latin America; Caribbean
    • N46 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Latin America; Caribbean
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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