these municipalities. The map is coded in the following way. The 17 municipalities which adopted the reform early, between May 2002 and March 2004, are marked by circles. The 17 municipalities which adopted the reform late, between April 2004 and December 2004 are marked by triangles. Both early and late adopters are fairly dispersed throughout Mexico.

The fact that adoption of the reform varied across municipalities and across time makes it possible to control for municipality speci...c and time speci...c e¤ects. The e¤ect of the reform is thus identi...ed using cross-municipality di¤erences in the reform dummy over time. The identi...cation strategy is valid as long as the changes in outcome variables over time would be similar across municipalities in the absence of the reform. In particular, the identi...cation strategy may be violated if the implementation of the reform followed a speci...c pattern in terms of municipality characteristics that are related to changes in outcomes. For example, if the municipalities which experienced a high increase in registered businesses adopted the reform ...rst, I might ...nd an e¤ect of the reform even if there was no e¤ect. To gauge whether or not there was such a speci...c pattern of implementation, I performed a number of checks.

First, I interviewed several sta¤ members at the COFEMER who are in charge of implementing the reform. They informed me that their goal was to bring the reform ...rst to the urban municipalities that have the largest volume of economic activity in Mexico. However, within this set of municipalities they did not specify a particular pattern of implementation. In fact, they mentioned that all municipality governments they approached were very interested in adopting the reform. As discussed in Section 2, COFEMER was not able to implement the reform in all municipalities simultaneously since they did not have enough personnel.

Second, to check whether the 34 municipalities in my sample are indeed comparable, I examine data from the 1994 and 1999 Economic Census. Panel A of Table 3 presents averages for 1999 log GDP per capita, log economic establishments per 1000 capita, log ...xed assets per capita, and log investment per capita split-up by early and late adopters<sup>11</sup> . The comparison of early and late adopters in Column 3 of Table 3 shows that they are no statistically significant di¤erences in terms of the number of economic establishments per capita, ...xed assets per capita, and investment per capita. Log GDP per capita is higher on average for early adopters. To further examine the pattern of implementation of the reform, I regress each of the three Census variables on the quarter of implementation. The coe¢ cients on quarter of implementation are reported in Column 4 of Table 3. While there is no statistically signi...cant trend for changes in log employment per capita and log investment per capita, log GDP per capita and ...xed assets per capita are higher for municipalities that adopted the reform earlier.

> 11 The GDP, establishment, ...xed assets, and investment data come from the 1994 and 1999 Economic Censuses. To convert these numbers into per capita values I use population data from the 1995 Population Count and the 2000 Demographic Census.

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