The Long Shadow of History? The Impact of Colonial Labor Institutions on Economic Development in Peru

Abstract

Recent scholarship claims that extractive colonial institutions explain the lackluster performance of Latin American economies today. We examine forced labor in colonial Peru. We find that while coercive labor institutions led to a drop in the indigenous population until the seventeenth century, they lost their influence over the remainder of the colonial period. We check for persistence using post-colonial outcomes; there is none. To address endogeneity, we look at other potential extraction mechanisms and exploit policies that exempted certain zones as an instrumental variable. Our results are consistent with existing historical narratives that point to institutional adaptation over time.