Jenny Guardado disloyalty to the Crown,and were considered more development (e.g.,Nunn and Wantchekon 2011).The competent and morally upright in office,these results most direct effect of exploitation and violence was thus are consistent with historians'descriptions of the ad- a reduction of trust in public institutions such as the vent of "worse"colonial officials due to office-selling electoral system,potentially undermining the efficient (Ramos Gomez 1985;Lohmann Villena 1957;Moreno functioning of government. 1977,71;Sanz Tapia2009,43) More generally,it is likely that persistent exploita- After using office prices and individual traits to doc- tion led the Peruvian indigenous population to limit ument potential negative selection.I then examine how their interactions with colonial authorities and Span- this class of rulers may have impacted long-run devel- ish settlers leading to low cultural assimilation (Diaz- opment within Peru.The main empirical challenge is Cayeros 2011).Yet,such a lack of assimilation may that factors rendering certain offices more valuable to be economically costly in the long run due to the loss "tyrants or thieves"may also affect long-run economic in potential gains from interactions with the majority outcomes in ways that have nothing to do with the type (and richer)group (Lazear 1999).In the case of Peru- of government officials.To distinguish between these vian provinces,the ethnic segregation of the indigenous effects,I focus on the difference or gap in office prices population started to become visible post office-selling at times of low oversight(during wars)relative to peri- (1780).worsened in the nineteenth century (1876).and ods of high oversight(during peace).Because province is even higher in contemporary times(2013). fundamentals in Peru are unlikely to vary between war To the best of my knowledge,this is the first study to and peace times in Europe,price differences likely cap- use office prices to examine negative selection into gov- ture shifts in the selectivity criteria of the Crown due to ernment positions and their long-term impact.Existing fiscal considerations and not other factors studies have clearly laid out the problem of politica Results using this approach show that a 30%increase selection(Besley 2005)and the returns to public office in the average office price sold during wartime leads to (Querubin and Snyder 2013;Eggers and Hainmueller a 9.6%reduction in the average household consump- 2009)but have not examined the link between returns tion today.Higher prices also reduce years of schooling obtained while in office and lasting political and eco- and public good provision.Because all specifications nomic underdevelopment. include the prices paid during peace(a time of greater In particular,this paper shows that the type of lo- selectivity),this estimate accounts for provincial traits cal rulers is a key mechanism explaining the long-run that do not vary between war and peace times.In fact, impact of colonial institutions.While a number of stud- additional analyses show that the gap in office prices is ies document the legacy of colonial institutions on de- unrelated to a host of slow-changing geographic,demo- velopment(Engerman and Sokoloff 1997;Coatsworth graphic and economic traits that could plausibly affect 2008;Acemoglu,Johnson,and Robinson 2001,2002: development in the long run.Moreover,regional eco- Banerjee and Iyer 2005;Bruhn and Gallego 2012;Dell nomic disparities are already visible by 1827-just af- 2010),part of this effect may be driven by attracting ter Peru gained independence-suggesting the impor- certain types of colonial officials in the first place.4 In tance of colonial rather than postcolonial factors. other words,low-quality individuals sorting into certain Exploitation by more extractive governors often led offices partly explains why institutions impact current to rebellions by the indigenous population.These re- development across subnational regions in Peru. bellions were usually brutally put down,creating fur- The paper also relates to the literature on social ther resentment and a cycle of persistent conflict.Us connections and bureaucratic performance.Although ing detailed data on local rebellions for eighteenth some studies find social connections detrimental to bu- century Peru,and following the same specification reaucratic performance(Xu 2017),others suggest they as before,I find that provinces with higher prices may help screen officials and improve performance in paid during European wars experience a higher num- office (Jia,Kudamatsu,and Seim 2015:Allen 2005).In ber of spontaneous uprisings against their colonial colonial Peru,the temporary shift in the type of offi- rulers in the office-selling period(1673-1751)than im- cials governing the colony coincided with more polit- mediately afterward (1752-1780).Additional results ical conflict in the short and long run,indicating that from a panel specification-thus controlling for fixed social connections may have helped the Crown screen provincial traits and common-year factors-are con- and incentivize officials compared to those who en- sistent with these findings.Furthermore,this relation- tered office via office-selling. ship is still visible in recent times:districts with higher Finally,these results document the role of conflict prices in the seventeenth and eighteenth centuries in magnifying and perpetuating the impact of histori- also exhibit greater initial support for anti-government cal events.Given the wide-ranging impact of conflict Maoist guerrillas in the 1980s (Shining Path).Given on income,health,human capital,and other economic that frequent political violence discourages investment outcomes,its recurrence may help explain regional dis in physical and human capital,and reduces the effec- parities not only in Peru but also in other settings where tiveness of government,it is unsurprising that these its persistence has been well documented(e.g.,Besley L high-priced provinces exhibit lower levels of consump. and Reynal-Querol 2014.for sub-Saharan Africa). tion,schooling and public good provision today. Exploitation and political violence also exerted a Acemoglu,Johnson,and Robinson(2001)imply that officials will long-run effect on culture and trust,which a recent lit- ing to go to high settler mortality areas would be most likely extrac- erature has argued has important effects on economic tive.This paper complements this view. 972Jenny Guardado disloyalty to the Crown, and were considered more competent and morally upright in office, these results are consistent with historians’ descriptions of the ad￾vent of “worse” colonial officials due to office-selling (Ramos Gomez 1985; Lohmann Villena 1957; Moreno 1977, 71; Sanz Tapia 2009, 43). After using office prices and individual traits to doc￾ument potential negative selection, I then examine how this class of rulers may have impacted long-run devel￾opment within Peru. The main empirical challenge is that factors rendering certain offices more valuable to “tyrants or thieves” may also affect long-run economic outcomes in ways that have nothing to do with the type of government officials. To distinguish between these effects, I focus on the difference or gap in office prices at times of low oversight (during wars) relative to peri￾ods of high oversight (during peace). Because province fundamentals in Peru are unlikely to vary between war and peace times in Europe, price differences likely cap￾ture shifts in the selectivity criteria of the Crown due to fiscal considerations and not other factors. Results using this approach show that a 30% increase in the average office price sold during wartime leads to a 9.6% reduction in the average household consump￾tion today. Higher prices also reduce years of schooling and public good provision. Because all specifications include the prices paid during peace (a time of greater selectivity), this estimate accounts for provincial traits that do not vary between war and peace times. In fact, additional analyses show that the gap in office prices is unrelated to a host of slow-changing geographic, demo￾graphic and economic traits that could plausibly affect development in the long run. Moreover, regional eco￾nomic disparities are already visible by 1827—just af￾ter Peru gained independence—suggesting the impor￾tance of colonial rather than postcolonial factors. Exploitation by more extractive governors often led to rebellions by the indigenous population. These re￾bellions were usually brutally put down, creating fur￾ther resentment and a cycle of persistent conflict. Us￾ing detailed data on local rebellions for eighteenth century Peru, and following the same specification as before, I find that provinces with higher prices paid during European wars experience a higher num￾ber of spontaneous uprisings against their colonial rulers in the office-selling period (1673–1751) than im￾mediately afterward (1752–1780). Additional results from a panel specification—thus controlling for fixed provincial traits and common-year factors—are con￾sistent with these findings. Furthermore, this relation￾ship is still visible in recent times: districts with higher prices in the seventeenth and eighteenth centuries also exhibit greater initial support for anti-government Maoist guerrillas in the 1980s (Shining Path). Given that frequent political violence discourages investment in physical and human capital, and reduces the effec￾tiveness of government, it is unsurprising that these high-priced provinces exhibit lower levels of consump￾tion, schooling and public good provision today. Exploitation and political violence also exerted a long-run effect on culture and trust, which a recent lit￾erature has argued has important effects on economic development (e.g., Nunn and Wantchekon 2011). The most direct effect of exploitation and violence was thus a reduction of trust in public institutions such as the electoral system, potentially undermining the efficient functioning of government. More generally, it is likely that persistent exploita￾tion led the Peruvian indigenous population to limit their interactions with colonial authorities and Span￾ish settlers leading to low cultural assimilation (Diaz￾Cayeros 2011). Yet, such a lack of assimilation may be economically costly in the long run due to the loss in potential gains from interactions with the majority (and richer) group (Lazear 1999). In the case of Peru￾vian provinces, the ethnic segregation of the indigenous population started to become visible post office-selling (1780), worsened in the nineteenth century (1876), and is even higher in contemporary times (2013). To the best of my knowledge, this is the first study to use office prices to examine negative selection into gov￾ernment positions and their long-term impact. Existing studies have clearly laid out the problem of political selection (Besley 2005) and the returns to public office (Querubin and Snyder 2013; Eggers and Hainmueller 2009) but have not examined the link between returns obtained while in office and lasting political and eco￾nomic underdevelopment. In particular, this paper shows that the type of lo￾cal rulers is a key mechanism explaining the long-run impact of colonial institutions.While a number of stud￾ies document the legacy of colonial institutions on de￾velopment (Engerman and Sokoloff 1997; Coatsworth 2008; Acemoglu, Johnson, and Robinson 2001, 2002; Banerjee and Iyer 2005; Bruhn and Gallego 2012; Dell 2010), part of this effect may be driven by attracting certain types of colonial officials in the first place.4 In other words,low-quality individuals sorting into certain offices partly explains why institutions impact current development across subnational regions in Peru. The paper also relates to the literature on social connections and bureaucratic performance. Although some studies find social connections detrimental to bu￾reaucratic performance (Xu 2017), others suggest they may help screen officials and improve performance in office (Jia, Kudamatsu, and Seim 2015; Allen 2005). In colonial Peru, the temporary shift in the type of offi￾cials governing the colony coincided with more polit￾ical conflict in the short and long run, indicating that social connections may have helped the Crown screen and incentivize officials compared to those who en￾tered office via office-selling. Finally, these results document the role of conflict in magnifying and perpetuating the impact of histori￾cal events. Given the wide-ranging impact of conflict on income, health, human capital, and other economic outcomes, its recurrence may help explain regional dis￾parities not only in Peru but also in other settings where its persistence has been well documented (e.g., Besley and Reynal-Querol 2014, for sub-Saharan Africa). 4 Acemoglu, Johnson, and Robinson (2001) imply that officials will￾ing to go to high settler mortality areas would be most likely extrac￾tive. This paper complements this view. 972 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S000305541800045X