Colonial agricultural estates and rural development in twentieth-century Mexico

This study documents that municipalities in central Mexico closer in the past to an agricultural estate (hacienda) are associated with higher literacy and lower poverty throughout the twentieth century than municipalities similar in other respects but farther from a hacienda. The results are robust to various specifications, neighbour matching analyses, and a placebo-type test. The complementarities between late-colonial haciendas in central Mexico and mining and trade appear to have set municipalities close to a hacienda on a distinct development path. The evidence points to local-scale economies in hacienda locations that coordinated new investments away from agriculture and towards the new industrial and commercial sectors. The twentieth-century land reform and the railroad play a small role in explaining hacienda legacy. Our findings highlight the role of landed estates as centres linking rural economic activity to the main colonial economic activities, mining and trade.