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Institutional Inertia: Persistent Inefficient Institutions in Spain

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  • José Antonio Espín-Sánchez

Abstract

In 1966, after over 700 years, the irrigation community in Mula (Spain) switched from auctions to a quotas to allocate water from its river. This change happened in the absence of either political or technological change. Quotas were more efficient but required that farmers own water property rights. A farmer would promise to pay over time and became a borrower. However, she would not work hard because the output went to the lender. Anticipating this outcome, the lender would not sell the water rights. A temporary increase in output prices increased their collateral solving the commitment problem.

Suggested Citation

  • José Antonio Espín-Sánchez, 2015. "Institutional Inertia: Persistent Inefficient Institutions in Spain," Documentos de Trabajo de la Sociedad de Estudios de Historia Agraria 1506, Sociedad de Estudios de Historia Agraria.
    • Handle: RePEc:seh:wpaper:1506
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    References listed on IDEAS

    as
    1. Daron Acemoglu & James A. Robinson, 2008. "Persistence of Power, Elites, and Institutions," American Economic Review, American Economic Association, vol. 98(1), pages 267-293, March.
    2. Samuel Garrido & Salvador Calatayud, 2011. "The price of improvements: agrarian contracts and agrarian development in nineteenth‐century eastern Spain," Economic History Review, Economic History Society, vol. 64(2), pages 598-620, May.
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    Cited by:

    1. Jose-Antonio Espin-Sanchez & Javier Donna, 2014. "The Illiquidity of Water Markets," 2014 Meeting Papers 1247, Society for Economic Dynamics.

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    More about this item

    Keywords

    Institutions; Natural Resources; Water; Financial Institutions;
    All these keywords.

    JEL classification:

    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N53 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Europe: Pre-1913
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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