Corruption and Colonial Legacies

There has been some great work in the last couple of years investigating the long-run effects of Spanish colonialism on Latin American development.  Melissa Dell’s “The persistent effects of Peru’s mining mita” is one example (it was published in Econometrica but here is a working paper version).

I just learned of another interesting working paper on this general topic.  The author is Jenny Guardado R. and the piece is called “Office-Selling, Corruption and Long-term Development in Peru.” I haven’t read it yet but it’s moving to the top of my pile.  Here’s the (rather long) abstract:

This paper investigates the private returns to colonial offices and how these influence long-term economic and political outcomes across sub-national provinces in Peru. Exploiting exogenous variation in the needs of Spanish monarchs to sell offices due to fiscal emergencies induced by European wars and employing a unique dataset of the prices at which they sold them, I show how rates paid for colonial offices exhibit a pattern consistent with rent- seeking. In particular, positions with greater access to rents from agriculture and to gains from trade monopolies exhibit differentially higher prices than others. A closer look at the mechanisms behind these results reveals that when faced with a trade-off between revenue and quality of colonial officials, the Crown generally chose the former. The result was a decline in the ability of the Spanish monarch to monitor and enforce colonial policy limiting rent-seeking. I then present evidence demonstrating that these activities exerted negative influences on development over the long run. Specifically, provinces with highly valued offices in the 18th century today have higher poverty rates, lower public good provision and lower household consumption. One reason why the effects of rent-seeking persisted is through political conflict: provinces with highly valued offices also exhibited frequent anti-colonial rebellions, heightened anti-government violence and a deep-seated mistrust of politicians and democracy today. These results suggest that corruption have negative lasting consequences for economic development by exacerbating political conflicts.

h/t Justin Sandefur

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