We explore the role played by contractual incentives generated by non-replicable factors, high risk and costly verifiability in securing long term, sustained gains from world trade for indigenous communities. We examine the long term effects on indigenous populations on cultivating one of the world’s most valuable traded commodities: the “Spanish Red” dye extracted from the cochineal insect. We exploit the discontinuous fragility of cochineal with respect to micro-climatic differences during the growing season to identify the effect of a legacy of cochineal production. We find that a legacy of cochineal production lowered the headcount poverty ratio in Mexican municipalities by 0.1, comparable to the entire effect of the Progressa conditional cash transfer program over a ten year period. Furthermore, cochineal production raised female literacy by 0.6 percentage points. Municipalities that contained pueblos that once produced cochineal are significantly more unequal, however, have significantly fewer indigenous households and are less likely to formalize indigenous local government institutions. We interpret these results as reflecting the long-term effects of cochineal and the Repartimento contract that emerged to support the cochineal trade, provided opportunities to women and provided an alternative to indigenous institutions as a means to manage risk.
Alberto Díaz-Cayeros is an Associate Professor of International Relations and Pacific Studies at UCSD and the Director of the Center for U.S.-Mexican Studies (USMEX). He is affiliated with the Center for Democracy, Development, and Rule of Law (CDDRL), the Stanford Center for International Development (SCID), and is a member of the board of the Center for Latin American Studies. Before taking a position at Stanford, he taught at UCLA and Instituto Tecnológico Autónomo de México in Mexico City. He has also been a researcher at CIDAC, a think tank in Mexico City. His current research interests include poverty, development, federalism, clientelism and patronage, and Mexico.