Political Economy

Why did some of Mexico’s earliest public pension institutions fail? This article examines the decline of non-military Montepíos—pension-paying institutions for civil servants in New Spain and early independent Mexico—after 1821. Rather than viewing their collapse mainly as a consequence of the political and fiscal turmoil that followed independence, the article argues that weaknesses in the pension systems’ own design were central. These Montepíos operated largely on a pay-as-you-go basis, using current contributions to finance current benefits, but they lacked mechanisms to keep contributions and future obligations in balance. Drawing on archival records and demographic evidence, the article shows that contributors often paid into the system for relatively short periods while pensions, especially survivor pensions, could continue for many years. Gender and marriage patterns further extended these payment periods. The findings show that problems commonly associated with modern pension systems—underfunding, demographic pressure, and a mismatch between contributions and benefits—were already present in early welfare institutions in Spanish America.

This study uses the synthetic control method to estimate how signing a free-trade agreement with the United States affects member countries’ GDP per capita. For each country, the method constructs a counterfactual estimate of income had the agreement not been signed and compares it with observed outcomes. The results are heterogeneous: agreements are associated with positive per-capita GDP effects in Chile and Jordan, while NAFTA is estimated to have harmed Mexico’s per-capita GDP; several other cases show no discernible significant effect. The analysis also finds that agreements appear less beneficial when a country depends more heavily on trade with the United States. The findings contribute to debates about trade as a development strategy and show that an agreement with a high-income technology-frontier economy does not by itself ensure economic growth.

This study asks how local institutions shape the establishment of fast-food outlets across urban districts in Peru, where many districts have no such outlets. The authors develop a market-entry framework in which the number of firms depends on local demand, available infrastructure, and the quality of municipal institutions. They construct institutional-quality measures from municipal administrative and organizational characteristics and estimate a zero-inflated count model that distinguishes whether outlets are present from how many operate when a market is served. Institutional quality is most clearly related to whether a district attracts outlets; urban-development management and information systems matter, while an investment-programming office is especially relevant to outlet counts. The results suggest that effective municipal administration can support infrastructure and reduce the costs of establishing businesses.

This paper studies how sovereign default can affect productivity and output, using a continuous-time model in which the government chooses whether to service its debt and default changes the future productivity process. The model is calibrated with financial-market information for ten European countries during 2009–2012, when stock prices and sovereign risk premiums moved inversely. For a pooled, representative country, the calibration implies that markets price in a 3.70% decline in total factor productivity; averaging country-specific estimates yields a 5.88% decline. The model predicts an output contraction of about 3.71% for a typical debt crisis. The authors use the framework to examine crisis dynamics, recovery, fiscal policy, and how default incentives vary with initial debt.