Office-Selling, Corruption, and Long-Term Development in Peru

Abstract

The paper uses a unique hand-collected dataset of the prices at which the Spanish Crown sold colonial provincial governorships in seventeenth and eighteenth century Peru to examine the impact of colonial officials on long-run development. Combining provincial characteristics with exogenous variation in appointment criteria due to the timing of European wars, I first show that provinces with greater extraction potential tended to fetch higher prices and attract worse buyers. In the long run, these high-priced provinces have lower household consumption, schooling, and public good provision. The type of governors ruling these provinces likely exacerbated political conflict, ethnic segregation, and undermined institutional trust among the population.