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

Alan Dye

The Journal of Economic History, 1994, vol. 54, issue 3, 628-653

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.

Date: 1994
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