Why is Brazil so messed up?

History matters, once again:

This paper analyzes the roots and implications of variations in de facto institutions, within a constant de jure institutional setting.  We explore the role of rent-seeking episodes in colonial Brazil as determinants of the quality of current local institutions, and argue that this variation reveals a dimension of institutional quality.  We show that municipalities with origins tracing back to the sugar-cane colonial cycle – characterized by a polarized and oligarchic socioeconomic structure – display today more inequality in the distribution of land.  Municipalities with origins tracing back to the gold colonial cycle – characterized by an overbureaucratic and heavily intervening presence of the Portuguese state – display today worse governance practices and less access to justice.  Using variables created from the rent-seeking colonial episodes as instruments to current institutions, we show that local governance and access to justice are significantly related to long-term development across Brazilian municipalities.

Here is the paper.  Hat tip to Leonardo Monasterio, who now has his own blog.


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