Sale of Offices, Corruption and Long-term Development in Peru.

Abstract: Due to dire financial circumstances, between 1687 and 1750 the Spanish Crown appointed colonial officials based on the monetary bids of those aspiring to office. This paper uses variation in prices to show how selling appointments made profiting from office a standard price within the Peruvian colonial administration: positions with greater access to rents exhibit higher prices than those where no such rents exist. Such difference in prices is not explicable by the salary received or the desire to serve the Crown. Rather, high prices are explained by the profits derived from a exploitative practice known as "repartimiento" or forced sales of merchandise. In addition, prices for offices were also influenced by the possibility of extraction due to the decline in the oversight ability of institutions that could represent a check to corrupt behavior. Finally, tracing colonial provinces with their contemporary counterpart I find that highly priced and demanded provinces in the 18th century exhibit worse development outcomes today. Such reversal in the fortunes of previously demanded provinces is due to the persistence of extractive practices during the episodes of sales. Overall, this paper provides the first estimates of the consequences of sale of appointments on the extractive nature of the colonial administration.