Jean-Paul Faguet

It gets very few resources in terms of taxation, and it just basically maintains an army. And in some countries, a currency, in other countries, not a currency. Colombia didn't have a single currency until about 70 years after its creation. I mean, it was unbelievable, right?

It gets very few resources in terms of taxation, and it just basically maintains an army. And in some countries, a currency, in other countries, not a currency. Colombia didn't have a single currency until about 70 years after its creation. I mean, it was unbelievable, right?

So these local institutions in 1539, let's say, and thereafter, are doing important local jobs in terms of provision of potable water. So, for example, in Tunha, which is a second institution, encomienda-based municipality that's founded in Colombia by the Spanish. They basically dig trenches in a canal and they bring potable water from the mountains into a fountain in the middle of town.

So these local institutions in 1539, let's say, and thereafter, are doing important local jobs in terms of provision of potable water. So, for example, in Tunha, which is a second institution, encomienda-based municipality that's founded in Colombia by the Spanish. They basically dig trenches in a canal and they bring potable water from the mountains into a fountain in the middle of town.

And in 1539, this is the source of potable water. And then the Spanish lords send their indentured servants out to like fill urns with water and take them back and that's what they drink. But it's the encomienda-based local government that's doing that. They manage waste. They regulate commerce.

And in 1539, this is the source of potable water. And then the Spanish lords send their indentured servants out to like fill urns with water and take them back and that's what they drink. But it's the encomienda-based local government that's doing that. They manage waste. They regulate commerce.

So if you're selling food or if you're tanning leather or if you're engaged in commerce more generally in the town, it's the local government that's regulating you and making sure that the food isn't unsafe, etc. So it's actually... It's a more capable and more involved, more sophisticated local state than I certainly ever expected for 1500s full stop, let alone 1500s Latin America.

So if you're selling food or if you're tanning leather or if you're engaged in commerce more generally in the town, it's the local government that's regulating you and making sure that the food isn't unsafe, etc. So it's actually... It's a more capable and more involved, more sophisticated local state than I certainly ever expected for 1500s full stop, let alone 1500s Latin America.

And then these places, the state sort of grows in capacity. And I guess the simple baseline comparison is that where there was not encomienda, there's no incentive for anyone to set up the colonial state. There have been indigenous institutions throughout Latin America, but especially in places like Colombia, they're just demolished because you have population declines in excess of 95%.

And then these places, the state sort of grows in capacity. And I guess the simple baseline comparison is that where there was not encomienda, there's no incentive for anyone to set up the colonial state. There have been indigenous institutions throughout Latin America, but especially in places like Colombia, they're just demolished because you have population declines in excess of 95%.

So if 95 percent of the indigenous population has died, the institutions that they ran fall completely apart. And they're basically, you know, scattered people like trying to run away from the Spanish or a couple of tribes off in the Amazon or in the Sierra Nevada in the north. So, you know, institutions of government collapse.

So if 95 percent of the indigenous population has died, the institutions that they ran fall completely apart. And they're basically, you know, scattered people like trying to run away from the Spanish or a couple of tribes off in the Amazon or in the Sierra Nevada in the north. So, you know, institutions of government collapse.

Yes, very good. You've put your finger on exactly the empirical challenge and the threat to our result, which is what economists call locational fundamentals. And so to expand a little bit on what you said, the argument would be, well, where did the Spanish go? The Spanish went to where there were large numbers of indigenous people because they wanted to enslave them and get them to work for them.

Yes, very good. You've put your finger on exactly the empirical challenge and the threat to our result, which is what economists call locational fundamentals. And so to expand a little bit on what you said, the argument would be, well, where did the Spanish go? The Spanish went to where there were large numbers of indigenous people because they wanted to enslave them and get them to work for them.

Where were these indigenous people living? They're living in places that tend to be more favorable to development anyway. Because the soils are better, there's a ready source of water, there's easy access to trade routes, you know, rainfall. I mean, whatever it may be. Maybe there are subsoil minerals that they're exploiting.

Where were these indigenous people living? They're living in places that tend to be more favorable to development anyway. Because the soils are better, there's a ready source of water, there's easy access to trade routes, you know, rainfall. I mean, whatever it may be. Maybe there are subsoil minerals that they're exploiting.

Whatever it may be, but there's some fundamental thing that's driving the modern day development outcomes. And the encomienda is just sort of accommodating itself to that. It's not the causal factor. So what we do... And I'm going to get a little bit into the nitty gritty of the methodology. We use a method called neighbor pair fixed effects.

Whatever it may be, but there's some fundamental thing that's driving the modern day development outcomes. And the encomienda is just sort of accommodating itself to that. It's not the causal factor. So what we do... And I'm going to get a little bit into the nitty gritty of the methodology. We use a method called neighbor pair fixed effects.

So the idea here is that all else equal, any two neighboring municipalities in Colombia are going to tend to be similar in terms of these locational fundamentals. They're going to have similar soil, similar rainfall, similar amounts of gold or absence of gold or whatever it may be.

So the idea here is that all else equal, any two neighboring municipalities in Colombia are going to tend to be similar in terms of these locational fundamentals. They're going to have similar soil, similar rainfall, similar amounts of gold or absence of gold or whatever it may be.