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

  • Mauricio Drelichman

    (The University of British Columbia)

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://128.118.178.162/eps/eh/papers/0404/0404002.pdf
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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
Date of revision:
Handle: RePEc:wpa:wuwpeh:0404002
Note: Type of Document - pdf; pages: 46
Contact details of provider: Web page: http://128.118.178.162

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  1. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April.
  2. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
  3. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  4. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implications for Growth," NBER Working Papers 3530, National Bureau of Economic Research, Inc.
  5. Asea, Patrick K. & Lahiri, Amartya, 1999. "The precious bane," Journal of Economic Dynamics and Control, Elsevier, vol. 23(5-6), pages 823-849, April.
  6. 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.
  7. Mauricio Drelichman, 2004. "The Curse of Moctezuma: American Silver and the Dutch Disease, 1501-1650," Economic History 0404001, EconWPA.
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