Institutional Development and Colonial Heritage within Brazil

This paper analyzes the determinants of local institutions and distribution of political power within a constant 'macro-institutional' setting. We show that characteristics of Brazilian municipalities related to institutional quality and distribution of political power are partly inherited from the colonial histories experienced by different areas of the country. 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 endowments (land). Municipalities with origins tracing back to the gold colonial cycle – characterized by a heavily inefficient presence of the Portuguese state – display today worse governance practices and less access to justice. The colonial rent-seeking episodes are also correlated with lower provision of public goods and lower income per capita.institutions, colonial heritage, rent-seeking, geography, Brazil

Rent Seeking and the Unveiling of 'De Facto' Institutions: Development and Colonial Heritage within Brazil

This paper analyzes the roots of variation 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 over-bureaucratic and heavily intervening presence of the Portuguese state -- display today worse governance practices and less access to justice. The colonial rent-seeking episodes are also correlated with lower provision of public goods and lower income per capita today, and the latter correlation seems to work partly through worse institutional quality at the local level.

Institutional development and colonial heritage within Brazil

This paper analyzes the determinants of local institutions and distribution of political power within a constant 'macro-institutional' setting. We show that characteristics of Brazilian municipalities related to institutional quality and distribution of political power are partly inherited from the colonial histories experienced by different areas of the country. 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 endowments (land). Municipalities with origins tracing back to the gold colonial cycle characterized by a heavily inefficient presence of the Portuguese state display today worse governance practices and less access to justice. The colonial rent-seeking episodes are also correlated with lower provision of public goods and lower income per capita

Essays in Public Finance and Development Economics

This dissertation comprises three chapters. The first chapter investigates whether consumers can help governments improve firm compliance with the Value Added Tax. It exploits quasi-experimental variation from a government program from Sao Paulo, Brazil that created monetary rewards for consumers to ask for receipts. To assess how incentives to consumers can be effective despite potential collusion opportunities, I construct datasets for 1 million firms, 40 million consumers, and 2.7 billion receipts. I estimate that revenue reported in retail increased by at least 22% over four years. The estimated compliance effect is stronger for sectors with a high volume of transactions and small receipt values, consistent with a model in which there are fixed costs to negotiate collusive deals to avoid issuing receipts. Furthermore, the effect has an inverted-U shape with respect to firm size. This result is consistent with a model of higher baseline compliance among larger firms, and in which shifts in audit probability from consumer monitoring increase in firm size. I find no effects on exit rates or formal employment decisions

Consumers as tax auditors

Access to third-party information trails is widely believed to be critical to the development of modern tax systems, but there is limited direct evidence of the effects of changes in information trails. This paper investigates the enforcement effect of an increased availability of third-party information, and sheds light on how governments can harness this information despite collusion opportunities. I exploit unique administrative data on firms and consumers from an anti-tax evasion program in Sao Paulo, Brazil (Nota Fiscal Paulista) that created monetary rewards for consumers to ensure that firms report final sales transactions, and establishes an online verification system that aids consumers in whistle-blowing firms. Using variation in intensity of exposure to the policy, I estimate that firms' reported revenue increased by at least 21% over four years. Heterogeneous effects across firms shed light on mechanisms: the results are consistent with fixed costs to conceal collusive deals and positive shifts in detection probability from whistle-blower threats. I also investigate the effect of whistle-blowers directly: firms report 7% more receipts and 3% more revenue after receiving the first consumer complaint. To study the role of the value of rewards in improving enforcement, I show evidence consistent with the possibility that lottery incentives amplify consumer responses due to behavioral biases, which would make it more costly for firms to try to match government incentives in a collusive deal. Finally, I find that although firms significantly adjusted reported expenses, there was an increase in tax revenue net of rewards of 9.

[pt] HERANÇA COLONIAL, INSTITUIÇÕES & DESENVOLVIMENTO: UM ESTUDO SOBRE A DESIGUALDADE ENTRE OS MUNICÍPIOS BRASILEIROS

Com o intuito de explicar os contrastes entre as trajetórias de desenvolvimento no mundo, a literatura internacional tem discutido amplamente o papel das instituições nesse processo. As disparidades verificadas no Brasil representam um desafio para a literatura, uma vez que instituições consideradas cruciais não variam dentro do país e, no entanto, há desigualdades significativas de desenvolvimento. Nesse sentido, o presente trabalho tem como objetivo analisar as origens e implicações de instituições locais específicas sob um mesmo conjunto de macro-instituições. Isto é, investiga causas e conseqüências de instituições de facto sob um mesmo arcabouço institucional de jure. Para tanto, estuda o papel de dois episódios rent-seeking do Brasil colonial - o ciclo do ouro e o ciclo do açúcar - como determinantes da qualidade de quatro dimensões institucionais específicas: desigualdade de distribuição de terras, concentração política, capacidade gerencial e acesso à justiça. Além disso, explora o caráter de choque institucional desses eventos históricos para avaliar os impactos dessas diferentes variáveis institucionais sobre o desenvolvimento econômico dos municípios, de modo a investigar se o padrão de desenvolvimento atual reflete, em parte, instituições determinadas por heranças coloniais distintas.The international literature has widely debated the role of institutions in determining the differences in development across countries. Since institutions considered crucial in this process do not vary within Brazil, the development contrasts observed among Brazilian municipalities raise a puzzle to the literature. This dissertation aims to analyze the roots and implications of specific local institutions under constant macro-institutions. We investigate causes and consequences of the variation in de facto institutions, within a constant de jure institutional setting. For this purpose, we explore the role of rent-seeking episodes in colonial Brazil - the sugar-cane colonial cycle and the gold colonial cycle - as determinants of the quality of four specific current local institutions: inequality in the distribution of land, political concentration, governance practices and access to justice. In addition to that, we explore the institutional shock represented by these historical events to evaluate the impact of these different institutional variables on economic development at the municipality level. We investigate whether the current development pattern observed within Brazil reflects, in some dimension, local institutions determined by different colonial heritages