Recent scholarship claims that extractive colonial institutions explain the lackluster performance of Latin American economies today. In this paper, we challenge the notion of institutional persistence by looking at coercive labor institutions in Peru throughout colonial times (1570s-1790s). Exploiting the spatial variation of indigenous settlements and labor institutions, we find that while these institutions led to lower tributary population until the late seventeenth century, they lost their influence over the remainder of the colonial period. In addition, we check for persistence on postcolonial outcomes using data from national censuses (from 1876 until 1940); there is none. In order to assuage endogeneity concerns, we look at other potential extraction sources such as tribute and exploit Spanish Crown policies that created “exclusion zones” around regional capitals exempt from labor service as an instrumental variable approach. Our results also survive tests on coefficient stability accounting for unobservable factors. Consistent with existing historical narratives, our results imply that institutions adapted over time to changes in factor endowments as the indigenous population fled the areas subject to forced labor. The Spanish government, the colonizers, and the indigenous populations negotiated the reach and burden of these institutions over time and the institutions fundamentally changed over the period of colonial rule. It appears then the shadow of history was not that long after all.
Paper co-authored with Leticia A. Abad.