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All that Glitters: Precious Metals, Rent Seeking and the Decline of Spain

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Author Info
Mauricio Drelichman (The University of British Columbia)

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Abstract

The windfall acquisition of precious metals from American mines and the military revolution of the Early Modern age allowed the Spanish monarchs to command large amounts of credit andpursue an expansive imperial policy unlike that of any other Early Modern nation; when the costof the Empire increased and mineral rents fell, the Crown auctioned off privileges and tax exemptions to fund its military efforts. I document how the silver windfall was linked to thecredit expansion and the undertaking of imperial policy. I then develop a model that shows howsuch a policy led Spain down a rent-seeking spiral, and accounts for the persistence of high rent seeking and slow growth even after the imperial policy was abandoned.

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File URL: http://129.3.20.41/eps/eh/papers/0404/0404002.pdf
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Publisher Info
Paper provided by EconWPA in its series Economic History with number 0404002.

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Length: 46 pages
Date of creation: 13 Apr 2004
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Handle: RePEc:wpa:wuwpeh:0404002

Note: Type of Document - pdf; pages: 46
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Web page: http://129.3.20.41

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Related research
Keywords: Early Modern Spain Rent Seeking Natural Resource Shocks Taxation Privileges Public Debt Institutional Lock-in

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Find related papers by JEL classification:
N1 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations
N4 - Economic History - - Government, War, Law, and Regulation
O1 - Economic Development, Technological Change, and Growth - - Economic Development

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  1. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April. [Downloadable!] (restricted)
  2. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-14, May. [Downloadable!] (restricted)
  3. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April. [Downloadable!] (restricted)
  4. North, Douglass C, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter. [Downloadable!] (restricted)
  5. Mauricio Drelichman, 2004. "The Curse of Moctezuma: American Silver and the Dutch Disease, 1501-1650," Economic History 0404001, EconWPA. [Downloadable!]
  6. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 503-30, May. [Downloadable!] (restricted)
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  7. Asea, Patrick K. & Lahiri, Amartya, 1999. "The precious bane," Journal of Economic Dynamics and Control, Elsevier, vol. 23(5-6), pages 823-849, April. [Downloadable!] (restricted)
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