An Experiment in Social Orders: the Development of Property Rights in Small Landholdings in Brazil (1850 – 1889)
Abstract: How have differences in political power and economic resources in 19th century Brazil affected the long-run evolution of institutions and living standards? With a closed political system limiting access to resources, Brazil managed to conduct an experiment in open social orders during the last years of the monarchical regime. Government sought to expand the small population base of the southern provinces by attracting foreign labor. To do this, it created near twenty small landholding settlements in regions with low population density. Their development was crucial for attracting more immigrants; for this reason the government provided these settlements with a special institutional environment that included housing subsidies and poor relief. Today, over a century later, these areas have some of the highest economic and social indicators in Brazil. This development is normally associated with the presence of immigrants from countries with better educational systems. This paper argues that local political institutions, not human capital, were the main factors for the development of the high standard of living in these regions. Using micro level data from archival documents, this study examines how social transfers can lift people out of a poverty trap and establish secure property rights. It concludes that open social orders can develop in a closed political system in the existence of institutional arrangements that control opportunistic governmental behavior.
