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Inside the Black Box: Partnerships in Rio de Janeiro, 1870-1891


  • Ran Abramitzky

    () (Department of Economics, Stanford University)

  • Zephyr Frank

    () (Department of History, Stanford University)

  • Aprajit Mahajan

    () (Department of Economics, Stanford University)


We use newly-constructed individual-level data on partnership contracts in late nineteenth century Rio de Janeiro to examine differences between limited and unlimited liability firms and partners, and to assess the impact of a major institutional reform that facilitated the formation of joint stock companies on the terms of partnership contracts. Contrary to expectation, we find that most unlimited partners contributed capital and received profit shares, and most non-managing limited partners received salaries. Limited partners contributed more capital and received lower salaries and profit shares than their unlimited partners; unlimited partners in limited firms received more favorable terms than those in unlimited firms. Finally, we find suggestive evidence that the reforms reduced the extent of income smoothing for the limited partner and increased the average quality of unlimited liability partners in limited liability firms. These findings highlight the role of incentives and the desire for income smoothing in shaping contract terms.

Suggested Citation

  • Ran Abramitzky & Zephyr Frank & Aprajit Mahajan, 2009. "Inside the Black Box: Partnerships in Rio de Janeiro, 1870-1891," Discussion Papers 08-044, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:08-044

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    References listed on IDEAS

    1. Howard Bodenhorn, 2002. "Partnership and Hold-Up in Early America," NBER Working Papers 8814, National Bureau of Economic Research, Inc.
    2. Naomi R. Lamoreaux & Jean-Laurent Rosenthal, 2006. "Contractual Tradeoffs and SMEs Choice of Organizational Form, A View from U.S. and French History, 1830-2000," NBER Working Papers 12455, National Bureau of Economic Research, Inc.
    3. Naomi R. Lamoreaux & Jean-Laurent Rosenthal, 2006. "Corporate Governance and the Plight of Minority Shareholders in the United States before the Great Depression," NBER Chapters,in: Corruption and Reform: Lessons from America's Economic History, pages 125-152 National Bureau of Economic Research, Inc.
    4. Hilt, Eric & O'Banion, Katharine, 2009. "The Limited Partnership in New York, 1822–1858: Partnerships Without Kinship," The Journal of Economic History, Cambridge University Press, vol. 69(03), pages 615-645, September.
    5. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," The Quarterly Journal of Economics, Oxford University Press, vol. 123(3), pages 1111-1159.
    6. Musacchio, Aldo, 2007. "Law and Finance in Historical Perspective: Politics, Bankruptcy Law, and Corporate Governance in Brazil, 1850 2002," The Journal of Economic History, Cambridge University Press, vol. 67(02), pages 503-506, June.
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    More about this item


    Partnerships; Brazil;

    JEL classification:

    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean
    • N96 - Economic History - - Regional and Urban History - - - Latin America; Caribbean


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