• Long term effect of Peru’s Mita institution

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    Melissa Dell’s paper, published in Econometrica in 2010 (Econometrica 78(6), 2010: pp. 1863­-1903), is a rare example of microdata based evidence on the role of historical institutions on contemporary development outcomes (here is some information, in Spanish, on the historical origin of the “Mita”, and here is the Spanish translation of the paper, great contribution for Latin readers).

    This study utilizes regression discontinuity to examine the long-run impacts of the mita, an extensive forced mining labor system in effect in Peru and Bolivia between 1573 and 1812. Results indicate that a mita effect lowers household consumption by around 25% and increases the prevalence of stunted growth in children by around six percentage points in subjected districts today. Using data from the Spanish Empire and Peruvian Republic to trace channels of institutional persistence, I show that the mita’s influence has persisted through its impacts on land tenure and public goods provision. Mita districts historically had fewer large landowners and lower educational attainment. Today, they are less integrated into road networks, and their residents are substantially more likely to be subsistence farmers.

    It also enriches the debate around the Engerman and Sokoloff argument that the institutions resulting from highly inequal colonial societies, especially in terms of land distribution, where a prominent cause of underdevelopment today in Latin America:

    The positive association between historical haciendas and contemporary economic development contrasts with the well known hypothesis that historically high land inequality is the fundamental cause of Latin America’s poor long-run growth performance (Engerman and Sokoloff (1997)). Engerman and Sokoloff argued that high historical inequality lowered subsequent investments in public goods, leading to worse outcomes in areas of the Americas that developed high land inequality during the colonial period. This theory’s implicit counterfactual to large landowners is secure, enfranchised smallholders of the sort that predominated in some parts of North America. This is not an appropriate counterfactual for Peru or many other places in Latin America, because institutional structures largely in place before the formation of the landed elite did not provide secure property rights, protection from exploitation, or a host of other guarantees to potential smallholders. The evidence in this study indicates that large landowners—while they did not aim to promote economic prosperity for the masses—did shield individuals from exploitation by a highly extractive state and ensure public goods. Thus, it is unclear whether the Peruvian masses would have been better off if initial land inequality had been lower, and it is doubtful that initial land inequality is the most useful foundation for a theory of long-run growth.

    Although it does not necesarily seem to invalidate the comparison with North America, this certainly opens avenues for a more nuanced view of different economic performances within the Latin American subcontinent.

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