Legacies of inequality: the case of Brazil

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Legacies of inequality: the case of Brazil Evan Wigton‑Jones1  Accepted: 27 September 2020 / Published online: 12 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020

Abstract This research examines the effects of inequality on long-run development within Brazil. I first exploit variation in temperature and precipitation to instrument for the local distribution of land in 1920 using a two stage least squares instrumental variables framework. My instrument is an index quantifying the suitability of local climatic conditions for plantation versus smallholder agriculture. I construct this index using information on the growing conditions of crops within certain plant taxonomies that are more biologically suited for smallholder or plantation production. I argue that this index more fully identifies the optimal environmental conditions for these two types of agricultural production, and I show that it serves as a robust predictor of local land inequality in the year 1920. IV estimates then reveal that greater inequality is associated with less local government spending on welfare and public goods over the 1995-2005 time period, as well as reductions in measures of local government quality and per-child education spending. It is also associated with lower levels of development, as measured by the local Human Development Index (HDI) for the year 2000. Inequality primarily affects the HDI through shorter life expectancies and lower incomes. I argue that the latter is consistent with the agrarian elite obstructing the transition of the local economy from agriculture to industry/services, as historically unequal municipalities contain a greater percentage of workers in the lower-wage agriculture sector, and this sector itself constitutes a larger share of local GDP. Keywords  Inequality · Economic development · Brazil · Agriculture JEL Classification  O15 · N36 · D02 · O12 · Q15

The author would like to thank the editor and three anonymous referees whose comments substantially improved this paper. I am also grateful to Steven Helfand, Joe Cummins, and David Brady for their insight and helpful comments. I also wish to thank Eustaquio Reis for generously sharing data on 1920 land inequality, Rodrigo Soares for sharing data on the Government Quality Variable, and participants at the 2017 Economic History Society Conference and the All UC-Caltech Conference on the Spatial Distribution of Economic Activity and Inequality over the Long-Run. All errors are my own. Electronic supplementary material  The online version of this article (https​://doi.org/10.1007/s1088​ 7-020-09184​-5) contains supplementary material, which is available to authorized users. * Evan Wigton‑Jones [email protected] 1



Husson University, 1 College Circle, Bangor, ME 04401, USA

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Journal of Economic Growth (2020) 25:455–501

1 Introduction Most contemporary economic literature holds inequality to be a key determinant of development. Nevertheless, a consensus has yet to emerge on the key element