The Pearl is set in La Paz, Mexico, a poor coastal town with racial problems which evolved from colonial domination. This setting provides the background for the conflicts that ensue from Kino's finding the Pearl of the World. Uneducated in the ways of the world, Kino and his family fall victim to racial prejudices as he is turned away as they seek help from the doctor for their baby, Coyotito, who has been stung by a scorpion. For, the doctor is a member of the colonial elite, who perceives Kino's family as "animals"; he tells Kino that he is a doctor, not a vertenarian. Likewise Kino is a victim of prejudice as he tries to talk with both the priest and the pearl dealers, both of whom try to exploit his ignorance.
The setting of the poor town beset by colonization acts as a catalyst to the development of Steinbeck's theme of the detrimental aspects of colonialism.
Steinbeck's short novel, The Pearl, is set in La Paz, Mexico. Readers of Steinbeck's work may have also come across the Kino's basic story, in brief, in Steinbeck's non-fiction chronicle of his ecology/biology expedition in Sea of Cortez.
"The Pearl grew out of an anecdote Steinbeck had heard during his visit to La Paz, which he recorded in the log section of Sea of Cortez (1941, 1951)"(eNotes).
The story, as it is told in The Pearl, takes place in the recent past and takes up many cultural characteristics of La Paz (from Steinbeck's point of view), using these characteristics quite actively in the text (superstitions surrounding medicine, strong class and racial bias, etc.).
More specifically, the settings of the story include a rural fishing village and the larger, more developed town of La Paz. The simplicity and hardship of the life of the fishing village is contrasted to the easier and more comfortable life of the town.
Notably, the populations of each of these places is quite different and the class divisions between the village and the town are paralleled by a racial divide. This dual division is seen by some readers to be the result of "colonial domination" (eNotes).