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When the Law Does Not Matter: The Rise and Decline of the Mexican Oil Industry

Abstract

Changes in formal institutions do not always affect economic outcomes. When an industry has specific technological features that limit a government's ability to expropriate it, or when the industry is able to call on foreign governments to enforce its de facto property rights, economic agents can easily mitigate changes in formal institutions designed to reduce these property rights. We explore the Mexican oil industry from 1911 to 1929 and demonstrate that informal rather than formal institutions were key, permitting oil companies to coordinate their responses to increases in taxes or the redefinition of their de jure property rights.

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Corresponding author
Stephen Haber is Peter and Helen Bing Senior Fellow and Professor of Political Science and of History, Social Science History Institute, Stanford University, Stanford, CA 94305. E-mail: haber@leland.stanford.edu.
Noel Maurer is Assistant Professor, Centro de Investigación Económica, Instituto Tecnológico Autónomo de México, Ave. Camino Santa Teresa #930, México, D.F. 10700, México. E-mail: maurer@itam.mx.
Armando Razo is a Ph.D. candidate in Political Science at Stanford University. E-mail: arazo@stanford.edu.
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The Journal of Economic History
  • ISSN: 0022-0507
  • EISSN: 1471-6372
  • URL: /core/journals/journal-of-economic-history
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