Working Paper: CEPR ID: DP14124
Authors: Antonio Henriques; Nuno Palma
Abstract: Why did the countries which first benefited from access to the New World -- Castile and Portugal -- decline relative to their followers, especially England and the Netherlands? The dominant narrative is that worse initial institutions at the time of the opening of Atlantic trade explain Iberian divergence. In this paper, we build a new dataset which allows for a comparison of institutional quality over time. We consider the frequency and nature of parliamentary meetings, the frequency and intensity of extraordinary taxation and coin debasement, and real interest spreads for public debt. We find no evidence that the political institutions of Iberia were worse until the English Civil War
Keywords: Atlantic traders; New institutional economics; The little divergence
JEL Codes: N13; N23; O10; P14; P16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Iberian political institutions were not worse than those of England until the English Civil War (N43) | English institutional divergence from the Iberian kingdoms began around the mid-seventeenth century (B15) |
| The frequency of parliamentary meetings in Iberia was comparable to that in England until the mid-seventeenth century (N93) | Iberian rulers were not more despotic than their English counterparts (N43) |
| The incidence of extraordinary taxation and coin debasement was lower in Iberia during the sixteenth century (N13) | Iberian political institutions were not worse than those of England until the English Civil War (N43) |
| Credible systems of public debt existed in Portugal and Spain in the sixteenth century (H63) | The narrative of Iberian decline due to absolute monarchies is not supported by historical evidence (N40) |
| The timing of institutional changes is crucial for understanding the economic outcomes of these regions (O17) | The narrative of Iberian decline due to absolute monarchies is not supported by historical evidence (N40) |