DP14124 Comparative European Institutions and the Little Divergence, 1385-1800

Author(s): Antonio Henriques, Nuno Pedro G. Palma
Publication Date: November 2019
Keyword(s): Atlantic Traders, New Institutional Economics, the Little Divergence
JEL(s): N13, N23, O10, P14, P16
Programme Areas: Public Economics, Development Economics, Economic History, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14124

Why did the countries which first benefited from access to the New World -- Castile and Portugal -- decline relative to their followers, especially England and the Netherlands? The dominant narrative is that worse initial institutions at the time of the opening of Atlantic trade explain Iberian divergence. In this paper, we build a new dataset which allows for a comparison of institutional quality over time. We consider the frequency and nature of parliamentary meetings, the frequency and intensity of extraordinary taxation and coin debasement, and real interest spreads for public debt. We find no evidence that the political institutions of Iberia were worse until at least the English Civil War.