Hostname: page-component-586b7cd67f-gb8f7 Total loading time: 0 Render date: 2024-11-28T21:50:03.540Z Has data issue: false hasContentIssue false
  • English
  • Français

The fiscal roots of urban bias

Published online by Cambridge University Press:  23 February 2017

Victor Alexander Menaldo
Victor Alexander Menaldo*
Affiliation:
University of Washington, Seattle, Washington, USA
*
Corresponding author: Victor Alexander Menaldo, e-mail: [email protected]
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

Why do some countries indulge in urban bias, potentially harming economic development in the process, while others promote a vibrant agricultural sector? Two main explanations have been put forth. On the one hand, market failures, due to information asymmetries, mean that farmers who dearly require credit to succeed are shut out of lending markets, even if lenders could potentially benefit from making loans more readily available. On the other hand, political failures, due to state capture, mean that farmers will be subject to implicit taxes as a way of generating rents for politically powerful, industrial interests in the city. This paper builds on the latter view and corroborates [Bates, Robert. 1981. Markets and States in Tropical Africa. Berkeley, CA: University of California Press.] insight that the state might have its own fiscal reasons for indulging in urban bias since both infant industries in the manufacturing sector and monopsony endowing marketing boards in the agricultural sector potentially provide easy-to-collect revenues. I adduce cross-national empirical support for the fiscal roots view that is robust across measures of state capacity and instrumental variables. A case study of Mexico also provides supporting evidence.

Type
Research Article
Information
Business and Politics , Volume 18 , Issue 4 , December 2016 , pp. 435 - 465
Copyright
Copyright © 2016 Walter de Gruyter GmbH, Berlin/Boston 

References

Anderson, Kym, and Valenzuela, Ernesto. 2008. Estimates of Global Distortions to Agricultural Incentives, 1955 to 2007. Washington, DC: World Bank.Google Scholar
Anei, Madhav, Ghatak, Maitreesh, and Morelli, Massimo. 2013. “Credit Market Frictions and Political Failure: Median Voter's Inefficient Preference for Banking Reforms.” Working Paper.Google Scholar
Armijo, Leslie Elliott. 2013 “Equality and Regional Finance in the Americas.” Latin American Politics and Society 55 (4): 95–118.Google Scholar
Astorga, Pablo, Bergés, Ame, and FitzGerald, Edmund V.K. 2003. The Oxford Latin American Economic History Database (OXLAD). The Latin American Centre. Oxford University.Google Scholar
Banerjee, Abhijit V., Duflo, Esther, Glennerster, Rachel, and Kinnan, Cynthia. 2013. “The Miracle of Microfinance? Evidence from a Randomized Evaluation.” Working Paper.Google Scholar
Banks, Arthur. 2009. Cross-National Time-Series Data Archive. SUNY Binghamton. http://www.databanks.sitehosting.net/.Google Scholar
Bates, Robert. 1981. Markets and States in Tropical Africa. Berkeley, CA: University of California Press.Google Scholar
Benjamin, Thomas. 2000. “Rebuilding the Nation.” In The Oxford History of Mexico, edited by Meyer, Michael C. and Beezley, Williams H., 467–502. Oxford: Oxford University Press.Google Scholar
Beschloss, Michael. 2014. “When J.F.K. Secretly Reached Out to Castro.” NYTimes.com: http://www.nytimes.com/2014/12/18/upshot/when-jfk-secretly-reached-out-to-castro.html?emc=eta1&_r=0&abt=0002&abg=0.Google Scholar
Binswanger, Hans, and Deininger, Klaus. 1997. “Explaining Agricultural and Agrarian Policies in Developing Countries.” Journal of Economic Literature XXXV (1): 1958–2005.Google Scholar
Bockstette, Valerie, Chanda, Areendam, and Putterman, Louis. 2002. “States and Markets: The Advantage of an Early Start.” Journal of Economic Growth 7: 347–369.Google Scholar
Calomiris, Charles, and Haber, Stephen. 2014. Fragile by Design: The Political Origins of Banking Crises and Scarce Credit. Princeton: Princeton University Press.Google Scholar
Dallek, Robert. 2013. Camelot's Court: Inside the Kennedy White House. New York: HarperCollins.Google Scholar
Ekelund, Robert, and Tollison, Rorbert. 1981. Mercantilism as a Rent-Seeking Society: Economic Regulation in Historical Perspective. College Station, TX: Texas A&M University Press.Google Scholar
Fox, Jonathan. 1992. The Politics of Food in Mexico: State Power and Social Mobilization. Ithaca: Cornell University Press.Google Scholar
Gerschenkron, Alexander. 1962. Economic Backwardness in Historical Perspective. Cambridge, MA: Belknap Press.Google Scholar
Gore, Charles. 2000. “The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries.” World Development 28 (5): 789–804.Google Scholar
Guo, Feng, and Sophie Huang, Ying. 2010 “Does ‘Hot Money’ Drive China's Real Estate and Stock Markets?” International Review of Economics & Finance 19 (3): 452–466.Google Scholar
Haber, Stephen, Razo, Armando, and Maurer, Noel. 2003. The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth in Mexico, 1876–1929. Cambridge: Cambridge University Press.Google Scholar
Haber, Stephen, Kline, Herb, Maurer, Noel, Middlebrook, Kevin. 2008. Mexico Since 1980. Cambridge, UK: Cambridge University Press.Google Scholar
Haber, Stephen, and Menaldo, Victor. 2011. “Does Oil Fuel Authoritarianism?: A Reevaluation of the Resource Curse.” American Political Science Review 105 (1): 1–26.Google Scholar
Hall, Lana, and Price, Turner. 1982. “Price Policies and the SAM: A Wheat-Maize Comparison.” Food Policy 7 (4): 302–314.Google Scholar
Hart, John Mason. 1989. Revolutionary Mexico: the coming and process of the Mexican Revolution. Berkeley, CA: University of California Press.Google Scholar
Herrendorf, Berthold, Rogerson, Richard, and Valentinyi, Ákos. 2013. “Growth and Structural Transformation.” In Handbook of Economic Growth Vol. 2, edited by Aghion, Philippe and Durlauf, Steven, 855–941. Philadelphia, PA: Elsevier.Google Scholar
INEGI. 2000. “Estadísticas Históricas de México.” Aguascalientes, Ags.: INEGI. IMF Working Paper.Google Scholar
Johnston, Bruce, and Mellor, John. 1961. “The Role of Agriculture in Economic Development.” The American Economic Review 51 (4): 566–593.Google Scholar
Kasara, Kimuli. 2007. “Tax Me if You Can: Ethnic Geography, Democracy, and the Taxation of Agriculture in Africa.” American Political Science Review 101 (1): 159–172.CrossRefGoogle Scholar
Lipton, Michael. 1977. Why Poor People Stay Poor: Urban Bias in World Development. Cambridge, MA: Harvard University Press.Google Scholar
Longstaff, Francis. 2010. “The Subprime Credit Crisis and Contagion in Financial Markets.” Journal of Financial Economics 97 (3): 436–450.Google Scholar
Marshall, Monty, and Jaggers, Keith. 2008. Polity IV Project: Political Regime Characteristics and Transitions, 1800–2006. University of Maryland.Google Scholar
Menaldo, Victor. 2016a. “The Fiscal Roots of Financial Underdevelopment.” The American Journal of Political Science 60 (2): 456–471.Google Scholar
Menaldo, Victor. 2016b. The Institutions Curse: Natural Resources, Politics, and Development. New York: Cambridge University Press.Google Scholar
Merrill, Tim L., and Miró, Ramón, eds. 1996. Mexico: A Country Study. Washington: GPO for the Library of Congress. http://countrystudies.us/mexico.Google Scholar
Ochoa, Enrique C. 2000. Feeding Mexico: The Political Uses of Food since 1910. Wilmington, DE: Scholarly Resources, Inc.Google Scholar
Powell, Wilbur. 1921. The Railroads of Mexico. Boston, MA: The Stratford Company.Google Scholar
Putterman, Louis, and Weil, David. 2010. “Post-1500 Population Flows and the Long-Run Determinants of Economic Growth and Inequality.” The Quarterly Journal of Economics 125 (4): 1627–1682.Google Scholar
Schroder, Stewart, and Vankudre, Prashant. 1986. “The Market for Bank Stocks and Banks' Disclosure of Cross-Border Exposure: the 1982 Mexican Debt Crisis.” Studies in Banking and Finance 3: 179–202.Google Scholar
Schuler, Kurt. 2015. “Historical Financial Statistics.” Center For Financial Stability.Google Scholar
Sherman, John. 2000. “The Mexican ‘Miracle’ and Its Collapse.” In The Oxford History of Mexico, edited by Meyer, Michael C. and Beezley, Williams H., 575–607. Oxford: Oxford University Press.Google Scholar
Sigmund, Paul. 1980. Multinationals in Latin America: the Politics of Nationalization. Madison, WI: The University of Wisconsin Press.Google Scholar
Soloaga, Isidro and Lara, Gabriel. 2007. “Distortions to Agricultural Incentives in Mexico.” Agricultural Distortions Working Paper 17, World Bank.Google Scholar
Staiger, Douglas, and Stock, James. 1997. “Instrumental Variables Regression with Weak Instruments.” Econometrica 65: 557–586.Google Scholar
Stiglitz, Joseph and Weiss, Andrew. 1981. “Credit Rationing in Markets with Imperfect Information.” The American Economic Review 21 (3): 393–410.Google Scholar
Welch, David. 2001. “Cuban Missile Crisis.” In The Oxford Companion to Politics of the World, edited by Krieger, Joel, 186–187. New York: Oxford University Press.Google Scholar
World Bank. 1990. World development Report 1990. New York, NY: Oxford University Press.Google Scholar
Yates, P. Lamartine. 1981. Mexico's Agricultural Dilemma. Tuscon, AZ: University of Arizona Press.Google Scholar