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"Abstract: This study exploits within-state variation in drought severity to identify how insurgency during the Mexican Revolution, a major early 20th century armed conflict, im- pacted subsequent government policies and long-run economic development. Using a novel municipal-level dataset on revolutionary insurgency, the study documents that municipali- ties experiencing severe drought just prior to the Revolution were substantially more likely to have insurgent activity than municipalities where drought was less severe. Many insur- gents demanded land reform, and following the Revolution, Mexico redistributed over half of its surface area in the form of ejidos: farms comprised of individual and communal plots that were granted to a group of petitioners. Rights to ejido plots were non-transferable, renting plots was prohibited, and many decisions about the use of ejido lands had to be countersigned by politicians. Instrumental variables estimates show that municipalities with revolutionary insurgency had 22 percentage points more of their surface area redistributed as ejidos. Today, insurgent municipalities are 20 percentage points more agricultural and 6 percentage points less industrial. Incomes in insurgent municipalities are lower and al- ternations between political parties for the mayorship have been substantially less common. Overall, the results support a view of history in which relatively modest events can have highly nonlinear and persistent influences, depending on the broader societal circumstances."

Table 1: Summary Statistics Mean S.D. Rainfall Insurgency Agrarian reform Public employees/1,000 inhab. (1940) Log income (2000) Percent agricultural (2010) Percent industrial (2010) Percent agricultural (1960) Percent industrial (1960) Percent agricultural (1940) Percent industrial (1940) Percent party alternations (1974-2009) Percent party alternations (1974-1993) Percent party alternations (1994-2009) (1) 0.78 0.59 0.49 20.03 7.7 0.07 0.25 0.26 0.21 0.24 0.12 0.24 0.08 0.37 (2) 0.21 0.49 0.26 9.5 0.9 0.10 0.08 0.28 0.12 0.19 0.09 0.19 0.19 0.27 p10 p90 (3) (4) 0.49 1.00 0.0 1.0 0.13 0.82 2.0 25.4 6.8 8.8 0.02 0.45 0.14 0.37 0.16 1.00 0.01 0.23 0.19 0.53 0.01 0.14 0.00 0.50 0.00 0.40 0.00 0.80 Table available for download here. Table 7: Economic outcomes today Overall Services Agricultural Industrial log wage (2) (3) Percent no water no electricity (5) (6) (1) (4) Panel A: IV Insurgency -0.292** (0.141) -0.322 (0.274) -0.289* (0.169) -0.218** (0.109) 14.095** (6.255) 2.922* (1.657) Panel B: OLS Insurgency -0.109*** -0.082* (0.044) (0.021) -0.122*** -0.086*** (0.021) (0.019) 0.715 (1.603) 0.404 (0.465) Observations Clusters Mean Dep. Var. 734,127 210 7.72 53,363 210 7.13 222,267 210 7.73 458,497 210 7.78 210 210 11.12 210 210 3.32 Table available for download here. Consider a version of the regression in the below equation (2) discussed in Section 3.1 of Dell (2012): Yms = do +8 insurgency ms +Qs + Ems Use Tables 1 and 7 and consider the OLS regression. What is the effect of a one standard deviation increase in insurgency on overall log wages? (Once you derive the expression, you can approximate the exact numeric result.) Please enter your numeric response with three digits after the decimal place (for example: 0.111) 3.1 Identification Strategy I test whether drought severity in the years leading up to the Revolution affected insurgency by running the following regression: insurgency.. = 7u+ydrought m + XB+,+ Emu (1) where insurgency, is a dummy variable equal to 1 if the citizens of municipality m - during the period between 1910 and 1918 - used violent force in a sustained attempt to subvert representatives of the Mexican government (i.c. local authorities and the military) or to confiscate others' property drought me measures the severity of drought during the 1906-1910 period, X.... contains a vector of time invariant geographic characteristics, and a is a state fixed effect. All variables are described in more detail in the following section. I then use drought severity as an instrument for insurgency in the following regression: o = &v + 8y insurgencym.+ X...+a+ms (2) 7 where is the outcome of interest. This instrumental variables approach requires the two following assumptions (Angrist, 2009). First, drought must be correlated with insurgency. If this correlation is only marginally different from xro, the resulting instrumental variables estimates are unlikely to be informative. Second, drought must be uncorrelated with any other determinants of the outcomes of interest: in other words, corr(drought....) = 0. This condition is referred to as the exclusion restriction. It will obtain if drought is as good as randomly assigned conditional on state fixed effects, and if drought has no effect on long-run economic and political outcomes other than through the insurgency channel While the exclusion restriction relies on the instrument being uncorrelated with unob- served determinants of the outcomes and hence is untestable, I shed light on its plausibility loy running two sets of placebo checks. First, I test whether drought is uncorrelated with a number of important observable characteristics measured in 1900. Second, I examine whether drought in other five year periods exerts persistent effects on long-run development To the extent that similar droughts in other periods do not have persistent effects, this would increase our confidence that any long-run effects of the 1906-1910 drought are acting primarily through its impacts on insurgency Table 1: Summary Statistics Mean S.D. Rainfall Insurgency Agrarian reform Public employees/1,000 inhab. (1940) Log income (2000) Percent agricultural (2010) Percent industrial (2010) Percent agricultural (1960) Percent industrial (1960) Percent agricultural (1940) Percent industrial (1940) Percent party alternations (1974-2009) Percent party alternations (1974-1993) Percent party alternations (1994-2009) (1) 0.78 0.59 0.49 20.03 7.7 0.07 0.25 0.26 0.21 0.24 0.12 0.24 0.08 0.37 (2) 0.21 0.49 0.26 9.5 0.9 0.10 0.08 0.28 0.12 0.19 0.09 0.19 0.19 0.27 p10 p90 (3) (4) 0.49 1.00 0.0 1.0 0.13 0.82 2.0 25.4 6.8 8.8 0.02 0.45 0.14 0.37 0.16 1.00 0.01 0.23 0.19 0.53 0.01 0.14 0.00 0.50 0.00 0.40 0.00 0.80 Table available for download here. Table 7: Economic outcomes today Overall Services Agricultural Industrial log wage (2) (3) Percent no water no electricity (5) (6) (1) (4) Panel A: IV Insurgency -0.292** (0.141) -0.322 (0.274) -0.289* (0.169) -0.218** (0.109) 14.095** (6.255) 2.922* (1.657) Panel B: OLS Insurgency -0.109*** -0.082* (0.044) (0.021) -0.122*** -0.086*** (0.021) (0.019) 0.715 (1.603) 0.404 (0.465) Observations Clusters Mean Dep. Var. 734,127 210 7.72 53,363 210 7.13 222,267 210 7.73 458,497 210 7.78 210 210 11.12 210 210 3.32 Table available for download here. Consider a version of the regression in the below equation (2) discussed in Section 3.1 of Dell (2012): Yms = do +8 insurgency ms +Qs + Ems Use Tables 1 and 7 and consider the OLS regression. What is the effect of a one standard deviation increase in insurgency on overall log wages? (Once you derive the expression, you can approximate the exact numeric result.) Please enter your numeric response with three digits after the decimal place (for example: 0.111) 3.1 Identification Strategy I test whether drought severity in the years leading up to the Revolution affected insurgency by running the following regression: insurgency.. = 7u+ydrought m + XB+,+ Emu (1) where insurgency, is a dummy variable equal to 1 if the citizens of municipality m - during the period between 1910 and 1918 - used violent force in a sustained attempt to subvert representatives of the Mexican government (i.c. local authorities and the military) or to confiscate others' property drought me measures the severity of drought during the 1906-1910 period, X.... contains a vector of time invariant geographic characteristics, and a is a state fixed effect. All variables are described in more detail in the following section. I then use drought severity as an instrument for insurgency in the following regression: o = &v + 8y insurgencym.+ X...+a+ms (2) 7 where is the outcome of interest. This instrumental variables approach requires the two following assumptions (Angrist, 2009). First, drought must be correlated with insurgency. If this correlation is only marginally different from xro, the resulting instrumental variables estimates are unlikely to be informative. Second, drought must be uncorrelated with any other determinants of the outcomes of interest: in other words, corr(drought....) = 0. This condition is referred to as the exclusion restriction. It will obtain if drought is as good as randomly assigned conditional on state fixed effects, and if drought has no effect on long-run economic and political outcomes other than through the insurgency channel While the exclusion restriction relies on the instrument being uncorrelated with unob- served determinants of the outcomes and hence is untestable, I shed light on its plausibility loy running two sets of placebo checks. First, I test whether drought is uncorrelated with a number of important observable characteristics measured in 1900. Second, I examine whether drought in other five year periods exerts persistent effects on long-run development To the extent that similar droughts in other periods do not have persistent effects, this would increase our confidence that any long-run effects of the 1906-1910 drought are acting primarily through its impacts on insurgency