Rent Seeking and the Unveiling of 'De Facto' Institutions: Development and Colonial Heritage within Brazil
This paper analyzes the roots of variation 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 de facto 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 over-bureaucratic and heavily intervening presence of the Portuguese state -- display today worse governance practices and less access to justice. The colonial rent-seeking episodes are also correlated with lower provision of public goods and lower income per capita today, and the latter correlation seems to work partly through worse institutional quality at the local level.
The authors gratefully thank Flávia Chein Feres for essential help in managing and sharing the basic geo-referenced dataset on Brazilian municipalities, Cláudio Egler for providing the geo-referenced data on the coastline and the projection of the Brazilian map in kilometers, and Jesus Fernando Mansilla Baca for providing the data on temperatures and types of soil. The paper also benefited from comments and suggestions from Marcelo de Paiva Abreu, Roger Betancourt, Filipe Campante, Cláudio Ferraz, Karla Hoff, Peter Murrell, Edson Severnini, Dietrich Vollrath, and seminar participants at Columbia University, IMF, IPEA-Rio, PUC-Rio, Johns Hopkins University/Center for Global Development, University of Delaware, University of Houston, University of Maryland-College Park, University of Pittsburgh, World Bank, the 2007 Panel of the LACEA Political Economy Group (Cartagena), the 2007 NBER Summer Institute on Income Distribution and Macroeconomics (Cambridge), and the 2007 LACEA Annual Meeting (BogotÃ¡). The views expressed herein are those of the authors and do not necessarily represent the view of the institutions to which they are affiliated, or those of the National Bureau of Economic Research.