Financial Market Regulation, Imperfect Capital Markets, and Industrial Concentration: Mexico in Comparative Perspective, 1830-1930

This article argues that there is a strong relationship between the efficiency with which a country mobilized capital for industrial development and the industrial structure that country developed. Differences in capital market development were a function of government regulatory policies and the costs of obtaining information. The analysis suggests that the development of financial institutions was not endogenous to the process of economic growth. In the case of Mexico, tight government regulatory policies coupled with high information costs gave rise to highly imperfect capital markets, which in turn were transmuted into imperfections in product markets.