Coffee Culture: Three Essays on The Political Economy and Development of Brazil in the Early Twentieth Century

Anna Sanchez da Costa Faria

Advisor: Peter J Boettke, PhD, Department of Economics

Committee Members: John V.C.Nye, Peter T. Leeson

Buchanan Hall, #135
April 06, 2017, 09:30 AM to 07:00 AM


If institutions are in fact the fundamental causes of development, but within-country de jure rules are the same, then what happens de facto influences growth prospects. The main motivation of my dissertation is to understand these de facto mechanisms through which informal institutions affect development within countries. The combined purpose of this dissertation is to ask and answer how the coffee economy and immigrants made some areas richer than the rest of the country.

In the twentieth century, long after the dominance of coffee interests over the entire economy dwindled, disparities between coffee and non-coffee regions are clear. A similar relationship exists between immigrant and non-immigrant areas. Northern and northeastern municipalities, far removed from the coffee economy, rank lowest in income per capita, while southern and southeastern municipalities rank highest. Other measures of well-being show similar patterns.

It was not until the turn of the twentieth century that such disparities appeared. In fact, the areas in the Southeast where today we see the highest levels of development were considered frontier lands up until the mid-nineteenth century. The timing of the initial divergence coincided with the coffee cycle (roughly 1830 to 1930, peaking from the 1890s until World War I) and the mass migration episode of the late nineteenth and early twentieth century. The persistent growth of coffee and immigrant areas suggests that the factors that allowed them to take off at the turn of the century contributed to their continued economic success.

The dissertation essays focus on the origins of the divergence, rather than on the analysis of outcomes. I emphasize the mechanisms of change and persistence, choosing an economic historical approach to ground the analysis. In sum, I argue that the events that took place in the coffee and immigrant areas in the late nineteenth and early twentieth century are key to explaining these within-country disparities. The effect is similar and more robust in immigrant areas.

In ”Coffee, Immigrants and Growth in Brazil”, I study the mechanisms through which the coffee economy and immigrant presence transformed the development paths of the municipalities which they affected. Empirical results indicate that immigrant presence has had a direct and long lasting effect on income per capita and the quality of local institutions, including the level of public goods provisioning and fiscal governance. The essay ”Ideas and Policy-Making in Early Twentieth Century Sao Paulo, Brazil” explores the political economy of the coffee period and the role of federalism in constraining elites and solving collective action problems at the local level. Finally, ”Immigrant Nationality and Human Capital Formation in Brazil” is an analysis of the heterogeneous effects of immigrant national traits on human capital formation in Brazil.