Market power in the henequen industry of Yucatán, Mexico

Richard Norman Glendening

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The dissertation examines three historical issues of the henequen industry of Yucatan, Mexico, from approximately 1880 to 1987. The first hypothesis is concerned with International Harvester signing agreements with several brokers in Merida, Yucatan, alleging that International Harvester acted as a monopsonist;A supply model of henequen that included the biological features of the henequen plant was developed. The producer's planting decision was modelled with a profit function subject to a vintage production function. Production was shown to be a function of lagged prices. The long run supply elasticity, estimated from regressions using both nominal and real prices, was found to about.80 suggesting an inelastic supply;A demand function was estimated assuming that the short run supply curve was perfectly inelastic. Actual and predicted henequen output, U.S. wheat production and prices, Philippine abaca exports, and a dummy variable representing International Harvester as a monopsonist were used as independent variables with real henequen prices as the dependent variable. The results are consistent with the hypothesis that henequen prices were determined in a competitive international market and International Harvester did not behave as a monopsonist;The second hypothesis was concerned with henequen exports and the campesinos' standard of living. A relationship of birth rates to proxies for income and consumption was asserted. Birth data from four Yucatecan communities for the years from 1880 to 1930 was gathered for the dependent variable. The independent variables were henequen and corn prices. The statistical results were that births tended to increase with higher henequen prices and fall with higher corn prices;The last hypothesis stated that the changes in the henequen industry occurring after 1937 should lead to a lower supply elasticity of henequen. The changes included a land reform movement, the development of a government bank to finance and manage the ejidos, and the nationalization of the Yucatecan cordage industry. The estimates for the price elasticities was about.80 again, indicating the supply elasticity of this period was about the same as that of the earlier period.

Date: 1993-01-01
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