Colonial institutions matter, Brazilian style

Rent Seeking and the Unveiling of ‘De Facto’ Institutions: Development and Colonial Heritage within Brazil
Joana Naritomi, Rodrigo R. Soares, Juliano J. Assunção
March 2007

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 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 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