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Avoiding Holdup: Asset Specificity and Technical Change in the Cuban Sugar Industry, 1899–1929

Published online by Cambridge University Press:  03 March 2009

Alan Dye
Alan Dye
Affiliation:
Visiting Assistant Professor of Economics at the University of Michigan, Ann Arbor, MI 48109-1220, and the Universidad Carlos III, Madrid, Spain.
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Abstract

Asset specificity can have profound influences on the economic structure of a country. An example is post-colonial Cuba. This article demonstrates that the existence of site specificity in assets generated problems of holdup for sugar mill owners in their contractual relations with cane suppliers. Recognition of that incentive structure offers an institutional explanation for the post-1900 concentration of U.S. investment in the eastern provinces. To reduce transaction costs, mill managers avoided investing in the western part of the island where the sugar industry was well established. A consequence was the relative decline of the western region.

Type
Articles
Information
The Journal of Economic History , Volume 54 , Issue 3 , September 1994 , pp. 628 - 653
Copyright
Copyright © The Economic History Association 1994

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