Institutional Barriers and Economic Growth in Portugal before 1914
Institutional Barriers and Economic Growth in Portugal before 1914
The comparative study of the economic growth of nations has focused strongly on Europe and America during the 19th century. The 1850-1914 period is considered a classic one in this respect, owing to the intensity of the convergence observed and therefore to the possibility of testing the Solow hypothesis that nations will converge in the long run. Current models accept that divergence in growth between economies can occur and is explained by the fact that those that have low starting income may be subject to non-economic barriers that neutralize this advantage. One of these factors is institutional backwardness, a subject that has gained much attention owing to the studies of Douglass North and to the advances of the New Institutional Economics. This project attempts to explore the relation between institutions and growth in the context of 19th century Portugal, by employing concrete historical data and proposing a methodology which allows us to quantify the extent to which institutions were inadequate in international comparative terms. Three areas will be studied. The first one refers to judicial institutions, whose importance derives from their function as protectors of property and contractual rights, and therefore as essential to investment. The measure of their efficacy is the interest rate on mortgage credit, which by definition is of the highest security and should therefore have the lowest cost, assuming that Justice functioned well. In this part of the research, we shall gauge to what extent this was the case and try to infer how well protected lenders felt themselves to be vis-à-vis borrowers. The second part of the project addresses the State's efficiency in the provision of a service which is of vital importance to economic performance, i.e. education. The aim will be to compare over time the supply of this service with its cost. The third element in the project focuses on the efficiency of the State in collecting revenue through taxes, i.e. in acquiring the sinews of power. The cost of the fiscal machine will be related to the amount of revenue generated by it, again in the long run, and this will permit an analysis regarding the roles of the structure of revenue and of the organization of the State in determining the success of this essential institutional process.
Estatuto:
Proponent entity
Financed:
No
The comparative study of the economic growth of nations has focused strongly on Europe and America during the 19th century. The 1850-1914 period is considered a classic one in this respect, owing to the intensity of the convergence observed and therefore to the possibility of testing the Solow hypothesis that nations will converge in the long run. Current models accept that divergence in growth between economies can occur and is explained by the fact that those that have low starting income may be subject to non-economic barriers that neutralize this advantage. One of these factors is institutional backwardness, a subject that has gained much attention owing to the studies of Douglass North and to the advances of the New Institutional Economics. This project attempts to explore the relation between institutions and growth in the context of 19th century Portugal, by employing concrete historical data and proposing a methodology which allows us to quantify the extent to which institutions were inadequate in international comparative terms. Three areas will be studied. The first one refers to judicial institutions, whose importance derives from their function as protectors of property and contractual rights, and therefore as essential to investment. The measure of their efficacy is the interest rate on mortgage credit, which by definition is of the highest security and should therefore have the lowest cost, assuming that Justice functioned well. In this part of the research, we shall gauge to what extent this was the case and try to infer how well protected lenders felt themselves to be vis-à-vis borrowers. The second part of the project addresses the State's efficiency in the provision of a service which is of vital importance to economic performance, i.e. education. The aim will be to compare over time the supply of this service with its cost. The third element in the project focuses on the efficiency of the State in collecting revenue through taxes, i.e. in acquiring the sinews of power. The cost of the fiscal machine will be related to the amount of revenue generated by it, again in the long run, and this will permit an analysis regarding the roles of the structure of revenue and of the organization of the State in determining the success of this essential institutional process.
Objectivos:
The first stage of this project is already under the way and has led to the collection of 1800 mortgage contracts between 1870 and 1914 in the province of Estremadura. The results of this indicate a high degree of judicial inefficiency by international standards and will soon be published in a book chapter in the USA. In view of this, it has been decided to pursue the same line of research in the context of Lisbon, where credit costs are expected to be low, given greater financial development, but information costs were probably high due to a more impersonal and spread out society. We have gathered 300 contracts here and hope to write this up by the summer of 2008. Once this has been done, it is planned to move on to the second phase and examine the operation of the Portuguese educational system during the same period.
Parceria:
Unintegrated
