How was Human Capital Formation in Mexican Regions Influenced by Globalization and Porfiriato Policies? Christoph Schulze December 27, 2014 Abstract This paper is using Mexican Census data from 1930 to apply tech- niques introduced in the article “Quantifying quantitative literacy” by Joerg Baten (2009) 1 . Assuming that people round their age, when they don’t have knowledge about numbers, I calculate an index measuring the age heaping in particular regions in Mexico. Using this measure as a proxy for numeracy, I try to identify the effect of industrializa- tion and educational policies on ABCC levels of particular regions in Mexico. I find, that in the north compared to the south, people tend to have better numeracy. Finally, I claim to have found evidence that this is due to advantages in infrastructure. 1 A’Hearn, Baten, and Crayen (2009)
Transcript
How was Human Capital Formation in
Mexican Regions Influenced by
Globalization and Porfiriato Policies?
Christoph Schulze
December 27, 2014
Abstract
This paper is using Mexican Census data from 1930 to apply tech-niques introduced in the article “Quantifying quantitative literacy” byJoerg Baten (2009)1. Assuming that people round their age, when theydon’t have knowledge about numbers, I calculate an index measuringthe age heaping in particular regions in Mexico. Using this measureas a proxy for numeracy, I try to identify the effect of industrializa-tion and educational policies on ABCC levels of particular regions inMexico. I find, that in the north compared to the south, people tendto have better numeracy. Finally, I claim to have found evidence thatthis is due to advantages in infrastructure.
The beginning of the industrial progress in Mexico started with the lib-eral movements by the middle of the 18th century. Benito Juarez Garcıa,the leader of the liberal movement, recognized Mexico’s bad situation af-ter the war of independence and tried to lead the high indebted state on anew way. Social and political turmoils though, made that impossible. Yearslater, under Porfirio Dıaz2 in office, these changes should have been realized.Capital inflows from North America and Europe supported the expansionof the railroad network, mainly to increase the transportation of scarce re-sources to higher developed economies and to offer the produced goods fromthe new factories on the world market (Haber, 1990). During his presidency,Porfirio Dıaz increased industrial output, but also inequality in the country.This led later to the Mexican revolution in 1910.Besides the accumulation of land and capital, human capital also presentsone of the major inputs for economic growth. We define human capitalas a set of abilities a person is acquiring during her life (Schultz, 1961).Especially in more rural areas one might expect an increase in inequalitywith the opening to the world markets (Baten and Mumme, 2010), whichmight be represented in the end in human capital. On the other hand, animprovement in the primary school system should lead to an increase inhuman capital formation (Baten and Mumme, 2010).In this essay I want to analyze the development of human capital and it’simpact factors. I focus on the time of the globalization and Porfiriato3. Thefollowing question shall be answered in this essay: What are the drivingforces of the accumulation of human capital and are there any trends due tothe opening to the world markets in human capital? While looking at thedifferent regions in Mexico, I also look at infrastructural changes, especiallythe railroad network.In the following I give an introduction to the historical background andsocial tensions during the presidency of Porfirio Dıaz. I try to answer myresearch question with the help of preexisting theories and empirical results.
1.1 Literature
Until now, there are several publications relating to industrialization inMexico and the development of the educational system. Stephen Haber,Professor at Stanford University, dedicates his work to the textile industryand the economic development during the Porfiriato. Mary Kay Vaughan,Professor at University of Maryland, in turn specialized in the educationalsystem in Mexico. Neither of them looks at the consequences of human cap-ital. Baten and Mumme (2010) analyze the development of human capital
2Jose de la Cruz Porfirio Dıaz Mori (from now on only Porfirio Dıaz)3Expression for the time when Porfirio Dıaz was in office
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in Latin America, without explaining the causes of specific developments.This shall be intended in this work.
2 Historical Background
2.1 Reformation
After the war of independence4 and the war with the USA5, Mexicowas highly indebted. Santa Anna (complete name Antonio Lopez de SantaAnna) was in office and movements against him, resulting in the Plan deAyutla on 1st March 1854, were formed. One of their leaders was IgnacioComonfort, who took over after Santa Anna was overthrown. The newliberal government tried to stabilize the financial situation. The ministerof finance, Miguel Lerdo de Tejada, passed a law in 1855 which was laterknown as Ley Lerdo6. That is why the church had to hand over mostof their properties to the state, which in turn sold them to other parties.Benito Juarez, who was minister of justice at that time, passed the LeyJuarez. These laws adjudicated the special treatments of the church. Allthese reforms, which were summarized in 1857 in a constitution, provokedthe conservative party to war of reforms between conservatives and liberals(Hamnett, 2006). After four years of war, the liberals won and Benito Juarezbecame president in 1961.
2.2 Intervention
After the war, the situation seemed to calm down and reforms couldbe realized. Besides Ley Lerdo and Ley Juarez, the government declaredfreedom of religion. From there on, Christianity has not been the religionof the state anymore. The Mexican government accomplished to decreaseforeign debt from $90Mio Pesos (1851) to $82Mio Pesos (1862) with the helpof the reform laws (Hamnett, 2006). Still, social and economic problems inthe rural provinces were noticeable, as infrastructure and farm land werein a bad shape after the conflicts. In great parts former soldiers started toplunder, ignoring the new set laws (Hamnett, 2006). In addition, Mexicohad difficulties to pursue further payment obligations. After the Treaty ofLondon of 1861, France decided to launch an invasion and to establish amonarchy in Mexico. This was supported by the remaining Conservativesin Mexico. By the will Napoleon III. Maximilian I. was proclaimed emperorof Mexico, despite renewed disputes in Mexico City he became the supremepower over Mexico. The United States of America saw through the French
4Mexican war of independence 1810-18225Segregation of Texas6Ley de Desamortilisacion de Fincas Rusticas y Urbanas (eng. Gesetz zur Auflosung
des landwirtschaftlichen und stadtischen Besitzes)
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invasion an infringement in the Monroe Doctrine and intervened. They sentweapons and veterans to support the troops of Benito Juarez. In 1867, theFrench troops were defeated and Benito Juarez became again the presidentof Mexico.
2.3 Reconstruction
To guide Mexico on a new way, Benito Juarez made plans to ease theexport of Mexican production (Bulmer-Thomas, 2003). Tax reforms werecarried out to attract foreign capital. Furthermore a system of protectionismwas installed to help local industries (Hamnett, 2006). After his death in1872, Sebastian Lerdo de Tejada became President of Mexico, who pursueda similar policy. The main goal during his term of presidency was to connectthe railway network of Mexico with the United States.
2.4 Porfirio Dıaz
In the presidential election of 1876 Porfirio Dıaz, known as the oppo-nent of Benito Juarez, resulted to be the winner. Like his predecessor, hetried to raise foreign capital to modernize the crumbling infrastructure. Inthe presidential election of 1880, where Dıaz decided not to run, ManuelGonzalez emerged as the winner. Historians today argue that he has beenselected by Porfirio Dıaz and just only acted as his “puppet” (Hamnett,2006; Bulmer-Thomas, 2003). Gonzalez ensured that the telegraph and railnetwork was expanded so that in some cities 1880 phones were already avail-able (Kirkwood, 2009) and tied to the rail network. The railway line fromEl Paso (Texas) to Mexico city was completed during his term. Since thisventure was very costly, 1884 a important law changed the land ownership,which made Mexico more attractive again for foreign investors. Previously,owning lands did not mean that the land owner also had the property of allsubsoil. This was changed in 1884 and many US investors bought more ter-ritory to search for valuable minerals. As a consequence, many farmers losttheir land and had to move (Kirkwood, 2009). The forced resettlement andexpropriation was the main trigger of the henceforth developing inequality.Porfirio Dıaz became president again in 1884 and continued with his “Pano Palo” policy. In other words, either you support him or you were elimi-nated (Hamnett, 2006). Revolting movements and opposition parties weresuppressed.
2.4.1 Education during Porfiriato
The ultimate goal of Porfirio Dıaz was control and discipline. To achievethis, so he knew, he had to start in the education system. Apart from thelaw of compulsory school attendance, which existed since 1857, few thingswere done by then to improve the education system. The supervisory board
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distributed the education budget very unequal, so that the funds remainedmostly in Mexico City. This is exactly what should change from now on.Between 1877 and 1911, the share of the education budget has doubled to7% of the gross domestic product (Hamnett, 2006). Justo Sierra Mendez,who was then in the “Office of Public and Law” was mainly responsiblefor the 1890 conducted educational reform (Vaughan, 1990). A commonschool system was developed that should later educate the Mexican middleclass. Self-control and discipline replaced the religious education, followingthe European model. The number of primary schools doubled from 1878to 1907 from 5,000 to 10,000 schools in the country. Similarly, the numberof students tripled to 600,000 in that time frame. The number of teachersemployed increased from 13,000 to 21,000 during the same period. Overall,spending on the education sector was tenfold (Vaughan, 1990). ThereuponJusto Sierra was appointed Minister of Education in 1905. In this position,he served until the 1911.
2.4.2 Infrastructure
In addition to the educational system, much has still been invested ininfrastructure and the expansion of the railway network.
Apart from the already existing lines, El Paso - Mexico City, Laredo - Mex-ico City and Nogales - Guyamas have been built (see Table 2). This ledto an increase in transportation of primary commodities to Europe and theUnited States. Furthermore many indigenous tribes, as well as small vil-lages had to leave their territory. Farmers were expropriated to make wayfor progress. By improving the railroad network, the transport costs declineddramatically. The Cost of transporting one ton of cotton from Queretaro toMexico City totaled in 1877 $61, whereas they fell in 1910 to $3. However,not only the rail network was expanded. Likewise, port facilities were built,such as in Ensenada, Baja California. After the Gold Rush in 1890, manyforeigners went there, to search for precious metals such as gold and silver.A “business school” was built in Ensenada to convert this region more intoone of the most important trade centers in the Pacific region (Flanigan,2001). The development of the steamboat favored the economic progress
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Year Connection
1882 Nogales - Hermosillo - Guyamas1882 Laredo - Monterrey - San Luis Potosı - Acambaro - Mexiko Stadt1884 El Paso - Chihuahua - Torreon - Zacatecas - Aguas Calientes
of the region. Several times a week ships were running from Ensenada tocontinue to transport goods north to San Diego. Accordingly, Ensenada hada positive trade balance, as up to 70% of exports resulted to be from goldand silver (Flanigan, 2001).In the south, they tried to develop more efficient ways of the material trans-port too. In 1881 the US American James B. Eads developed plans to con-struct a coast-to-Coast line. However, this proved to be complicated andwas discarded because Eads died shortly after having this idea. Years later,people saw the possibility to join the ports between the cities of Salina Cruzand Coatzacoalcos via a railroad network. The geographical conditions,however, made difficult so that the connection while existed since 1894, hadto be constantly renewed and the actual completion was in 1907. A fewyears later, with the commissioning of Panama Canal, this connection haslost its importance.
2.4.3 Production in Porfiriato
The extraction of mineral resources proved to be a lucrative source ofmoney in Mexico. The mining of silver rose from 606,000 tons in 1878 to 2.3Mio tonnes in 1910. Gold increased from 1,000 tons in 1878 to 37,000 tonsin 1910. This was possible by opening up new mines in northern Mexico.These are Sierra Mojada in Coahuila, Batopilas in Chihuahua and El Boleain Baja California. Likewise, the Production of crude oil increased from5,000 barrels in 1900 to 8,000,000 barrels in 1910 (Haber and Varela, 1993).But also an increase in employment in the textile industry. Especially in LaLaguna region7 the agricultural cultivation of cotton flourished. The popu-lation there grew tenfold to 200,000. This was largely due to the in-countryMigration and the high demand for cotton at this time (Kirkwood, 2009).The majority of the textile factories were in the three former textile centers
7Region in the north between Durango and Chihuaha
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Mexico City, Puebla and Guadalajara. As can be seen in Table 3, not onlygrew the number of the Cotton industry workers, but also of the workers inthe factories.Considered the overall economy, there were only a small number of shifts
between the industrial and agricultural sector workers. Now even more peo-ple had to be provided with food, leading to commercialization of agriculture(Haber and Varela, 1993). Between 1877 and 1910, Mexico faced a popula-tion increase of 9,7 Mio on 15,1 Mio inhabitants, which had forced to expandthe agricultural production (Bulmer-Thomas, 2003).Considered in the average, the annual per capita income grew by $62 in 1877to $91 in 1895 and finally to 132 dollars in 1910 (Haber and Varela, 1993)8.The process of industrialization also brought many problems. Mexico im-ported many very modern machines, but without the necessary know-how.Thus, for example, the furnaces came from the US, the machinery for man-ufacturing cigars from France, the paper machines from Switzerland andtextile machines from Belgium, England and USA. Mexico had failed toestablish institutions at first to obtain the necessary capital. So they werelacking especially banks, which made money-lending more difficult. So whenthey invested, they did heavily and huge in too large factories that producedfrom raw material to the finished product. So For example, the iron factory,built in 1900 in Monterrey or the paper mill in San Rafael, which was builtin 1890. The problem was, that the factories were not busy (Haber andVarela, 1993). Low inputs from the side Mexico, as well as on demand fromoutside. To counteract the Mexican government increased import tariffs tostimulate domestic demand. This seemed to work, but foreign goods tradersargued:
“The Mexican tariffs on cotton belong to the highest of theworld. Only Russia and Brazil levy higher tariffs. For someproducts, the tariff is threefold of the actual value of the prod-uct.”- North American trader
8measured in 1950 PPP
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3 Human capital - Theory and Empiric
Much of the existing theories of growth today set human capital aheadas one of the key elements in the development of economic growth (Barroand Sala-i Martin, 1998). Not only the knowledge plays a role, but alsoinstitutions (Vaughan, 1990), as well as the distribution of factors of pro-duction among the population. Schools play explicitly an important role,since important skills such as numeracy and literacy ability will be acquiredthere (Perotti, 1996).If a country is evolving from an agrarian state towards an industrializedcountry, human capital plays a key role. Especially in the manufacturingsector there is a high demand for skilled professionals, which is not thecase in agriculture. The productivity of industrial workers can be signifi-cantly increased through additional training. In agriculture, this is different.Agricultural workers, who enjoyed a good education will most likely requirehigher wages. However, it is unlikely that they will achieve that. This willultimately lead them to change into the industry sector, where they can berewarded accordingly. For Mexico, this didn’t work at all. First, becausethe necessary budget to build schools has been very uneven and generallygathered in the capital (Almada, 1967) and, secondly, the existing schoolshad very different qualities, which was due to the social class differences(Vaughan, 1990).Just in the north, in the state of Chihuahua, these social differences wereclearly apparent. Close to the United States, people in Chihuahua felt cul-turally more connected as for example in Chiapas. Similarly, a large partof the Mexican Elite where living in Chihuahua and took a kind of interme-diary role for foreign investors. This high society consisted mostly of richfamilies, such as the Terrazas or Hearst (Wasserman, 1979). These peoplehad much influence in the policy and owned many properties. After the“Mining Code” in 1884 the landowner also had possession of the earth be-low the surface, were precious metals could be mined. Alone in the stateof Chihuahua foreigners invested by the year 1907 50.000.000 $, mainly forthe extraction of mineral resources (Wasserman, 1979). These transactionswere only possible because the investors enjoyed a legal treatment that wasguaranteed to them by the elite.Furthermore, it often happened that this upper class in Mexico and investorswere married to each other. Especially in the Terraza family, by far the mostinfluential family in Chihuahua, this was the case. So Reuben Creel marrieda daughter of Don Luis Terraza (Wasserman, 1979).
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4 Quantitative Analysis
4.1 Method
I will now come to the determinants of human capital formation. Tomeasure the knowledge and ability of the Mexican population, two conceptsare used. Besides the widely-used literacy rate, I will make use of the in-dividuals numeracy, as this significantly gained importance in recent years(A’Hearn, Baten, and Crayen, 2009). It should be noted that with the helpof simple census data, this numeracy can already be calculated. This is veryhelpful as it is correlated with the literacy rate (Crayen, 2005).When looking at census data of any country in the early 20th century, itwill be clear that many individuals rounded their age to 0 or 5. This ratherfrequent phenomenon is referred to in the literature as “Age heaping”. Ifthere is Age heaping observed by many individuals in a census record, onecan suggest that those people do not frequently use numbers and thereforedo not know them at all. Hence, the Age heaping allows to draw conclusionsto numerical skills of individuals (A’Hearn, Baten, and Crayen, 2009). Withthe help of the ABCC Indexes, this age heaping is approximated. This indexis basically a ration of people rounding their age and people who do not.People younger than 22 and older than 73 years are excluded from the inves-tigation. The simple reason is that, especially in the younger age groups, theparents or other relatives specify the age for the person. Among older per-sons, it may often be the case that they just have the urge to over-estimatetheir age (A’Hearn, Baten, and Crayen, 2009). To avoid this distortion ofthe ABCC index, they are simply not included in the study.The data used for the analysis, were provided by Prof. Dr. Baten and werefrom the national census of 1930. There are disaggregated figures from 30states of Mexico, from which I calculated the ABCC Index for the birthdecades from 1860 to 1900.The number of observations of certain states is so small that they couldnot be incorporated in the analysis. This applies to the states of QuintanaRoo, Durango, Tabasco and Tamaulipas. For Yucatan, there were also fewobservations, however, sufficient to include it in the investigation. Whenlooking closely at the data one can see that these are slightly clustered.There are complete data sets on small towns, whereby major big cities arecompletely missing. Thus, for example, there is no data on Mexico City andGuadalajara available, which were known at the time as industrial centers.Accordingly, in the later analysis we don’t control for industrial centers.I applied various methods to calculate the extent of the effects of the dif-ferent variables. Firstly, a multivariable regression with the ABCC indexas the dependent variable. Secondly, a logit regression with the variable“numerate” as the dependent variable. At last, one final multivariable re-gression was performed, in which the dependent variable is the difference of
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the ABCC between 1900 and 1860 of the ABCC.For the individual characteristics of the regions, specific dummy variableswere created to serve as explanatory variables. In addition, infrastructuralvariables were created. This was done with respect to port connection, ac-cess to the rail network and for cities with a harbor and access to the railnetwork at the same time. Similarly, a dummy for cities for more than 15,000inhabitants. Finally, there is also a dummy for the regions where mineralswere recovered. This should be interpreted with caution, since data for themines in the north are not available.Apart from numeracy, I also analyzed trends of literacy rates, as these arealso correlated with the numeracy (Crayen, 2005) and thus may also shedlight on human capital formation.
4.2 Descriptive Analysis
First of all, I want to investigate whether within the present census dataAge heaping is present or not. With the help of Figure 1, it is easy to seethat the age groups 23-72 have rounded her age at 0 or 5, wherein the curvesare more pronounced at 0. In comparison to the present data, we can seethat a slight heaping is still present, but not to the extent of the earlierdata. Concluding from the theory, we might say already just by looking atthe picture, that numeracy has improved over time.
Own calculation
Figure 1: Distribution of Ages
Before I analyze the different regions of Mexico, I will first look at the con-centration of the population in Mexico. As can be seen here in Figure 2, amajority of the population were concentrated in the center around MexicoCity. The North, however, seems very sparsely populated. People therewere living in the large cities. The South, however, was also less populatedthan the center, but there were more cities and the population lived rather
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scattered.
(Census 1930)
Figure 2: Density of population
Furthermore, I will investigate the development of Mexico’s overall ABCCover time. As can be clearly seen, a steady upward trend in the numer-acy took place. By distinguishing between men and women, we see a slightdownhill movement in the trend for women from 1860 to 1870, but thenuphill. The biggest increase in numeracy is for people born in the periodof 1890 to 1900. This more or less coincides the period Justo Sierra was inthe Office of the education Minister. For the male, we can observe a similartrend. Their numeracy is also steadily increasing, with the biggest increasein the birth decade of 1890 to 1900.More importantly, it should be noted that all the years there is a significantdiscrepancy between men and women, which seems to converge towards theend. This is a clear indication that women were discriminated in terms ofeducation and occupation in the beginning of the analyzed time horizon.However, the generation born in 1890 in 1900 seem to have enjoyed bettereducation. One could draw now a clear connection between this and thewomen movements in the beginning of the 1920’s, when women started tofight for equal rights and participation in national politics. The hypothesiscould be, that better educated people tend to participate more in decisionmaking processes and hence present to be a threat to dictators. This argu-ment has been stretched by various researchers, such as Robinson (2012).In the case of Mexico, we could say that this argument holds true as theMexican Revolution took place in 1910. However, a detailed argumentationis beyond this essay.
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A glance at the statistics provides information on the proportions of eco-
Own calculation
Figure 3: ABCC by gender
nomically active and inactive people, distinguished between the sexes.As can be seen clearly, more than 90% of the women were not economically
Active
Year share men & women share men share women
(in %) (in %) (in %)
1900 33,69 61,13 6,46
1910 34,72 61,14 8,82
1921 34,07 65,02 4,49
1930 31,21 60,68 2,84
Not active
Year share men & women share men share women
(in %) (in %) (in %)
1900 66,41 38,87 93,64
1910 66,28 38,86 91,18
1921 66,93 34,98 96,61
1930 68,79 39,32 97,16
(Census 1930)
Table 4: Share of economically active and inactive
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active during the observed period, i.e. so they had fewer incentive to learnto read and write (no necessity to read and write). One has to be carefulwith causation here. They might have had the wish to learn how to read andwrite, but as they were at home, they didn’t see any necessity for that. Menwere consistently engaged above 60% in businesses and had more incentivesto learn new skills and apply them in their respective professions.When considering the distribution of economically active persons among
Sector share men & women share men share women
(in %) (in %) (in %)
Agriculture 21,9 44,3 0,3
Mining 0,3 0,6 0
Industry 4,2 7,2 1,2
Transportation 0,6 1,3 0
Trade 1,6 2,9 0,5
Administration 0,9 1,8 0,1
Liberal Arts 0,3 0,4 0,2
Working at home 32,6 0,7 63,2
Other 37,5 40,8 34,4
Total 100 100 100
(Census 1930)
Table 5: Occupation of economically active
the relevant sectors, one might recognize significant differences in the dis-tribution of work. The majority of the working men worked in agriculture,whereas most women were doing work at home. These include the professionof teacher and nannys for rich families.Mostly, however, are private home work has been done and was added to thissector. It is not entirely clear what account to that. A significant differencecan be noted also in industry, commerce and administration. Professions inthese sectors require special skills such as reading and writing. The propor-tion of working women is less than the proportion of men working there.Women were also limited in political activities. Until 1953, were not allowedto vote (Kirkwood, 2009), which also indicates the discrimination.When considering the literacy rate, it is striking that always younger peoplehad a higher level of literacy. This trend continued through all the regionsconsidered.Especially in the south and on the Yucatan Peninsula significant differencesbetween the sexes in literacy were present. In the north, these differencesseem to disappear in the younger population. Apart from that, it can beclearly seen that the North East and North West have the highest literacy
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Own calculation
Figure 4: Literacy rates by gender
rates. These regions include the state of Chihuahua, who enjoyed stronginflows of foreign capital.In the southwestern part of Mexico was just over 40% of young people read.The elderly there had somewhat smaller levels. These regions are neitherbordering the United States nor were they rich in mineral resources. In-vestors had little interest to settle down there. Accordingly, agriculturerather than trade or industry developed there.When considering the development of the ABCC, similar results reflect thesefindings.Regardless of the region, we can observe a slight downward trend of the
ABCC from birth decades 1860 to 1870. Furthermore, the ABCC improvedin the birth decade 1880 in some regions. From then on, however, an im-provement in the numeracy can be seen everywhere in Mexico. Especiallyin the north young people, born in the birth Decade in 1900, had ABCCvalues between 70 and 80, whereas in the south slightly lower between 60and 70.It should be noted that literacy and numeracy are indeed correlated witheach other. However, reading requires a higher ability or education in gen-eral, which is not necessarily the case with the numeracy. By opening upto the world market and trading primary goods, the agricultural societyalso began with to exercise non-agricultural activities in which simple useof numbers was required. The trade of goods would be an example. This
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Own calculation
Figure 5: Development of ABCC by region
will be clear, as literacy rates are always lower than these of numeracy. Sotherefore some people could work with numbers, but were not able read.
4.3 Statistic analysis
In the following I constructed a fully saturated model and performed amultivariable regression. All the included regressors are dummy variablesand control for gender, access to infrastructure, the birth decades, the re-gions and whether the individual lived in a big city or not. So the underlyingbase category in this case is a male person, born in the birth decade 1860,living in a rural area in the south west of Mexico and without any access totrains or harbors. The dependent variable in this case is the ABCC score.In table 7 we can see how the independent variables were correlated to eachother to account for multicolinearity. Apart from that, I also performed alogit regression, projecting the probability of no heaping (value of 1).I constructed a rail and harbor dummy by looking at what time a city con-nected itself the railway network. My theory is, that people improve theirABCC level when the town they were living in is connecting itself to therail network. As can be seen in the example of Ensenada in the North Westof Mexico, in these places where trade played an important role, foreignerscame and brought capital. Furthermore, they invested in schools, which inturn should improve peoples numeracy.Furthermore I included a city dummy for places with more than 15,000
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(Drury, 2000)
Figure 6: Railways in Mexico
inhabitants. My theory is, that rural places were more connected to agricul-ture and bigger cities to industry and trade. One might suspect that theseare correlated. By looking at table 7, we find that this is indeed slightly thecase.To control for regional differences, I included region dummies. These weredefined as here:
north west north east north west
Baja California Coahuila Zacatecas Nayarit
Sonora Nuevo Leon San Luis Potosı Jalisco
Chihuahua Tamaulipas Aguascalientes Colima
Durango Guanajuato Michoacan
Sinaloa Queretaro
east south south west south east
Hidalgo Mexico Chiapas Yucatan
Veracruz Morelos Oaxaca Campeche
Tlaxcala Queretaro Quintana Roo
Puebla Tabasco
Table 6: Constellation of regions
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4.3.1 Results
Looking at the regression tables 8 & 9 we can infer directly that beinga woman had a negative influence on numeracy levels. This is what weexpected already from the graphic analysis. Compared to men, womenhad, ceteris paribus, an ABCC of about 1.5 units lower. From the log-levelregression we can conclude that women had on average 0.3% lower ABCCscore than men (with the same background).Some of the infrastructure dummies resulted to be significant as well. Peoplewho grew up in a town with railway connection had, ceteris paribus, anABCC of 6.3 units higher than people who grew up in a town withoutaccess to the rail roads. From the log-level regression we can conclude, thatthe difference in access to infrastructure caused a 10.2% in the ABCC score.For port facilities, the effect is even stronger. The increase amounts to 6.7units (or 11.5%). Cities, which had access to both, seemed to have a positiveeffect as well. Though it didn’t result significant.From the coefficients of the birth decades we might also conclude, thatyounger people had better levels of numeracy. This was already suggestedby the graphs, such as figure 5. People born in the birth decade of 1900had compared to people born in 1860 an improvement of ABCC score of 8.5units (or 15.5% from log level regression). This might indicate, that therehas been a change in the educational system. As mentioned earlier, JustoSierra became minister of education by the end of the 19th century. Duringhis term the number of schools and teachers working increased.At last, I controlled for the different regions. As already suggested by figure9 (see Appendix), regions closer the USA seemed to have better literacy asstates, which are located in the south. I mentioned earlier, that there existsstrong correlation between literacy and numeracy. We might suspect thatnumeracy levels behave the same. Not surprisingly they do. Compared topeople born in the south west of Mexico, people born in the north east (northwest) tend to have additional 3.2 units (5.6) in ABCC score, everything elsebeing equal. From the log level model we might conclude that the increasein ABCC amounts to 6.5% (10.5%). This again proves the correlation ofliteracy and numeracy.9
5 Conclusion
Analyzing the infrastructure, especially the rail network, the effect ofincreasing industrialization during the Porfiriato was worked out in this pa-per.The observation period covers a time of opening to the world market (1860-1910), as well as increasing inequality. The foreign capital from Europe and
9† p smaller 10%; ∗ p smaller 5%; ∗∗ p smaller 1%
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North America play a key role in this scenario.Using census data from 1930, new insights have been gained on the relativelylittle considered territory. On the basis of literacy and numeracy, the devel-opment of human capital could be analyzed with respect to infrastructureand different regions. However, several factors have to be considered. Lit-eracy demands, in contrast to the numeracy, a primary education, whereasnumeracy can already be obtained by trading activities. The opening to theworld market required more trading activity of the population. Secondly,1890 Justo Sierra Mendez enforced an educational reform, which made thepreviously missing primary education necessary for the population.It was shown that different regions of Mexico have a significant impact onhuman capital. This can be explained by the different ethnic and geograph-ical composition of the regions, as well as the distance to the USA.The regression analysis showed that cities had a significant positive impacton human capital accumulation. This can be justified by the different dis-tribution of work of cities and rural areas. While in the north, investorssettled down and the population gathered in the cities, the society dispersedin the south several into smaller regions. In Chihuahuas for example thedominant elite made use of their relationships with investors that formedthe economic success of the region.Furthermore, there were, as expected, significantly positive effects for theimportant nodes of the infrastructure network. The theory was confirmedthat trading demands higher education as for example in agriculture. Fi-nally, no significant relationship between human capital formation and thepresence of mines in a region could be proved. This can be due to the factthat many important observations are not present in the data set. In par-ticular, the newly opened mines are missing in the states of Chihuahua andDurango. It is important to distinguish, whether a region is managed onlytemporarily or permanently by the Gold Rush. As in the case Ensenada,the Gold Rush did not endure a long time. Surprisingly good conditionscan be observed there, whereas in Guanajuato rather poor circumstancesdominated. This is shown firstly in the formation of human capital, andlater by uprisings and riots of the miners.In summary it can be said that internal conflicts of interests and social ten-sions slow down political reforms to help the formation of human capital.In Mexico, mainly the elite benefited of the reforms, whereas the farmersimpoverished by the expropriation. This has slowed the development of hu-man capital formation enormously.Future research could focus on the different industry levels of the differentregions. All the information I found is very general and not referring toany special municipalities. Another interesting aspect would be the ethniccomposition of the regions. Unfortunately, the information from the 1930is quite limited. It would be interesting to know, where more school werebuild and more teachers employed. Here I only suspect that an overall im-
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provement happened due to the educational reform, assuming it affected allthe regions equally. This must not be the case.
6 Critique of ABCC
With the ABCC index we try to approximate numeracy levels of a pop-ulation, assuming the presence of age heaping. But what about the ran-domness of this age heaping? And what if there is a “reverse” age heaping,meaning people consciously do report their age different from 0 or 5? It isquite a statement that people round their age to multiples of 5. Figure 1does give intuition for that, but how do we know that people in general notrandomize?In his paper, A’Hearn, Baten, and Crayen states, that multiples of 5 shouldat least be overrepresented when people report their age. This assumptionwill bound the ABCC index to be within 0 and 100. Using the Mexicancensus data from 1930, I found that this does not have to be necessarythe case. There are some places where multiples of 5 are underrepresented.Meaning that proportionally, there are more people in town who report agesnot being multiples of 5. This will lead to a ABCC index bigger than 100.As in my research, there are ABCC values as high as 125. This occurred,because in some place the sample size is very small. It results, that there issometimes only one particular women with that particular birthplace, whoreported an age different of a multiple of 5. When calculating the ABCCfor that place we will get an ABCC for the female population there of 125.So my suggestion would be, collecting bigger sample sizes for fewer places,rather than spreading above many places. Another correction could be,that we aggregate differently. I tried to aggregate by municipality, whichnot improved the result.
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