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.
Differences in colonial institutions appear to explain divergent patterns of political and economic development across former colonies. However, the origins of colonial institutions are not well understood. This article hypothesizes that variation in colonial labor institutions can be explained by both pre-colonial indigenous governance and the resource promise of colonies. We derive the hypotheses using a game-theoretic framework that emphasizes constraints facing profit-maximizing colonists. We test the hypotheses using an original dataset of natural resources and labor and tribute institutions from the pre-colonial and colonial periods for 455 sub-national territories in the Americas. The data are consistent with the hypotheses. Existing arguments about the national origin of colonists receive mixed support from the data. The article suggests that political and economic development today is a consequence of both natural resources and indigenous institutions, and therefore predates European colonialism.
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