Delegating governmental authority to private actors: Lordships, state capacity and development

This paper investigates the consequences of delegating governmental authority to private actors through the study of lordships, a pivotal political institution in historical Europe. I first document a negative relationship between being a seigneurial town and central state capacity in ancien-regime Spain. Next, I focus on the Kingdom of Granada after its conquest by Castile in 1492 to leverage on that the initial distribution of lordships was conditionally exogenous, with the results corroborating the negative effect of lordships on state capacity. I further show two additional important results. First, the effect is very persistent, with former lordships towns featuring less state capacity almost a century after the abolition of the seigneurial regime. Second, there is a non-monotonic effect on economic growth. Contrary to conventional wisdom, lordships towns did not underperform royal towns during the Ancien Régime. Yet, despite not having started with disadvantage, former seigneurial towns experienced lower population growth from the 1910s onwards, a period in which the Spanish state started to play a bigger investment role. Thus, towns with historically less state presence benefited less from state’s investments, lagging behind.