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The Growth of Productivity in Mexico, 1850-1933: Evidence from the Cotton Textile Industry

Aug 1997
Stanford King Center on Global Development Working Paper
The period prior to the 1930s are somewhat of a statistical Dark Age for scholars of the Mexican economy. We know little about the evolution of prices, wages, outputs, capital stock, or productivity. The available estimates of Gross Domestic Product for this period therefore rest heavily on imputed values and controlled conjectures. The purpose of this article is to employ previously unused data sources (industry-specific censuses at the micro level) and techniques (including panel-data regressions) to estimate labour productivity and total factor productivity over the period 1850-1933. We focus on the cotton textile manufacture, the largest mechanised manufacturing industry during the period under study. Our findings indicate: (1) Substantial productivity growth prior to the Porfiriato; (2) Rapid productivity growth throughout the Porfiriato; (3) A swift, though incomplete, recovery from the Revolution during the 1920's; and, (4) An insignificant impact on productivity from the Great Depression. We also find evidence, contrary to the literature to date, that the large, joint stock, limited liability publicly traded firms that were founded during the Porfiriato had higher levels of total factor productivity than private firms only for a short period of time and eventually became less productive. One possible cause for this phenomenon is that these firms were suboptimally large, suggesting that there may have been significant imperfections in the Mexican capital market that restricted the access of smaller firms and instead allowed participant firms to be too large for the markets they faced. Our results also indicate that labor markets in Porfirian Mexico were efficient: there is a strong statistical relationship between the firm-level productivity and the wage level. This suggests that manufacturers may not have had the kind of monopsony power in labor markets that the historical literature indicates.