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Grain Market Integration in Late Colonial Mexico

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Standard of Living

Part of the book series: Studies in Economic History ((SEH))

Abstract

This paper assesses the degree of integration of grain markets in late-Bourbon New Spain using standard econometric tools applied in other international cases. I find that grain market integration in Bourbon Mexico attained a degree comparable to other regions in the world, despite its poor transportation technology. Bourbon Mexico was not a market economy, but markets were effective tools in funneling resources from the countryside to the cities. An increase in prices in a leading market increased prices throughout the viceroyalty. For example, maize prices in Antequera, in the southern region of Oaxaca, within a year absorbed changes in prices in markets as distant as Guadalajara or San Luis Potosí (800 km). Likewise, wheat prices in Mexico City reacted to changes in the flour markets of the Gulf, such as Campeche (900 km away). These findings place grain markets in New Spain at a level of performance that is comparable to that found in the United States and some European regions. Spatial arbitrage (the buying in high-price regions and selling in low-price regions) was a driving force that broke local monopolies, opened the participation to other actors and created more diversified and integrated grain markets.

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Notes

  1. 1.

    Archivo General de Indias [Seville, Spain], Indiferente General, 1560, report from Guadalajara, February 1795.

  2. 2.

    Federico (2018) distinguishes price convergence as the outcome of integrated markets, and the speed of adjustment as an indicator of market efficiency. Both measures, convergence and speed of adjustment, are the key metrics to compare and assess the integration of markets.

  3. 3.

    All population figures from Instituto Nacional de Estadísticas Geografía e Informática (2014, Table 1.4), with the exception of Campeche, which is from Farris (1982, p. 448).

  4. 4.

    In smaller markets this is even more true, as it is illustrated in the semester reports of harvests and prices in the case of Tepatitlán, with which we opened the chapter. On market size and volatility, see Salvucci and Salvucci (1987, p. 78).

  5. 5.

    Use of alternative subsets using isolated observations (e.g. from Antequera, Puebla or Zacatecas) from other locations does not change these conclusions.

  6. 6.

    The calculation for the United States is based on the series of Maryland, Massachusetts, Pennsylvania and Vermont, via “Global Price and Income History,” http://gpih.ucdavis.edu

  7. 7.

    Using data kindly facilitated by Rafael Dobado, the average coefficient of variation in maize prices for a similar subset of locations was 19%, that is, an improvement in ten points from our figures.

  8. 8.

    In a standard regression, Eq. (18.3) becomes ∆(p1,t – p2,t) = a + b * (p1,t–1 – p2,t–1) + εt, where b = γ, a = γτ; b is expected to be negative.

  9. 9.

    The greater reliance of storage in wheat trade may explain its slightly slower speed of adjustment (Shiue and Keller 2007, p. 1204).

  10. 10.

    China also had a high degree of market integration in this time period, but the metric is not comparable (Shiue and Keller 2007). Another comparative point is Froot et al. (2019), which studied deviations from the law of one price in annual differentials of commodity prices between England and Holland from the fourteenth to the twentieth century. Their approach is similar to our Eq. (18.3) but without a constant (that is, plain deviations from the law of one price). The γ for their entire period (from the fourteenth to the twentieth century) is 0.21; our average γ using the same methodology (averaged across all our maize and wheat market pairs) is 0.39.

  11. 11.

    This approach is inspired in O’Gráda and Chevet (2002), while the idea to use a cross-panel setting comes from Dobado and Marrero (2005).

  12. 12.

    El Niño events had similar effects but lacked statistical significance.

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Authors and Affiliations

  1. Bowling Green State University, Bowling Green, OH, USA

    Amílcar E. Challú

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Correspondence to Amílcar E. Challú .

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  1. Religious Studies, Rhodes College, Memphis, TN, USA

    Patrick Gray

  2. College of Business and Economics, West Virginia University, Morgantown, WV, USA

    Joshua Hall

  3. Department of History, Bowling Green State University, Bowling Green, OH, USA

    Ruth Wallis Herndon

  4. Applied Economics, Facultad de Economia y Empresa, Zaragoza, Spain

    Javier Silvestre

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Challú, A.E. (2022). Grain Market Integration in Late Colonial Mexico. In: Gray, P., Hall, J., Wallis Herndon, R., Silvestre, J. (eds) Standard of Living. Studies in Economic History. Springer, Cham. https://doi.org/10.1007/978-3-031-06477-7_18

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