Three Essays on the Formation and Fragmentation of States

Fernando Arteaga

Major Professor: Mark Koyama, PhD, Department of Economics

Committee Members: Noel D Johnson, John V C Nye, Jenny Guardado

Carow Hall, Conference
April 30, 2019, 12:00 PM to 02:00 PM

Abstract:

The dissertation explores the economic processes behind the formation and fragmentation of polities with applications to the Spanish Empire.  First, I  propose a specific theoretical agent-based model of the size of nations, founded upon political economy precepts---in which bargaining relationships between elites and the general population are the norm. Second,  I focus on a singular study case of political fragmentation: the Spanish Empire’s demise in the late 18th and early 19th centuries. I provide an analytical narrative that emphasizes the role of exogenous shocks in undermining the long-lasting authority of the King across America. Lastly, I focus on the building of a new State(Mexico) and stress how preceding pre-hispanic institutions still have a large effect on Mexico's current political division and in its economic outcomes.

Essay 1 explores how political jurisdictions converge towards a given size? There is a growing literature within social sciences that attempts to find a response: in economics, the problem is interpreted as analogous to that of firm and city’s size, where there are centripetal and centrifugal forces that determine the actual size and number of nations; In international relations, the problem is approached as a path-dependent stochastic process that generates specific size distributions. My attempt in this paper is to fuse both perspectives, rendering a path-dependent process that is rooted in an economic rationale. I follow standard political economy and institutional tenets to do so. The model is founded upon the premise of a division among the population into two classes—a general population and a governing elite---that interact and constrain each other. I explore this framework through an agent-based model that allows me to generate a flexible yet rigorous setup to test different scenarios.

Essay 2 studies how an empire that seemed cohesive for hundreds of years could easily fragment in a decade? I provide an analytical narrative in which I stress the importance of the Spanish Empire’s fiscal sociology, one in which certain political enterprises (Miners, merchants, and the Crown) played key roles. I maintain that the empire had an implicit political arrangement; one in which the Crown maximized tax revenue through its power in managing the transatlantic trade. It did so by coopting a small set of local American elites (In Lima and Mexico City), which gained rents from their privileged trade position. It was a stable setting while Spain had sea supremacy. The advent of the British Navy in the late 18th century disrupted everything. Thereafter, the Crown attempted to decentralize its oceanic trade through new routes, and by trying to coopt a larger set of regional elites within the empire. This tactic backfired: it only gave major power to new local elites and created incentives for political fragmentation. I present a simple computational model of Spain’s political economy and do some simulations that could help explain the rationale behind such system.

Essay 3 asks what is the long-term impact of pre-colonial ethnic institutions? I examine the consequences of the fragmentation of local indigenous communities produced by Spanish rule in Mexico. To do this I make use of unique data from 18th-century pueblos—the basis of modern-day counties—to study the institutional impact that the formation of these pueblos had on current development in Mexico. I find that after controlling for alternative mechanisms, counties encompassing more historical pueblos, are more developed, and have less poverty, but are more unequal today. The effects are stronger in places where pre-hispanic roots are deeper (historical Mesoamerica and high altitude areas), suggesting the institutional impact has a pre-colonial basis.