Shipwrecked by Rents
Abstract: The trade route between Manila and Mexico was a monopoly of the Spanish Crown for more than 250 years. The ships that sailed this route---the Manila Galleons were "the richest ships in all the oceans", but much of the wealth sank at sea and remain undiscovered. We introduce a newly constructed dataset of all of the ships that traveled this route. We show formally how monopoly rents that allowed widespread bribery would have led to overloading and late ship departure, thereby increasing the probability of shipwreck. Empirically, we demonstrate not only that these late and overloaded ships were more likely to experience shipwrecks or to return to port, but that such effect is stronger for galleons carrying more valuable, higher-rent, cargo. This sheds new light on the costs of rent-seeking in European colonial empires.
