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"Drelichman, Mauricio"
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Lending to the borrower from hell : debt, taxes, and default in the age of Philip II
\"Why do lenders time and again loan money to sovereign borrowers who promptly go bankrupt? When can this type of lending work? As the United States and many European nations struggle with mountains of debt, historical precedents can offer valuable insights. Lending to the Borrower from Hell looks at one famous case--the debts and defaults of Philip II of Spain. Ruling over one of the largest and most powerful empires in history, King Philip defaulted four times. Yet he never lost access to capital markets and could borrow again within a year or two of each default. Exploring the shrewd reasoning of the lenders who continued to offer money, Mauricio Drelichman and Hans-Joachim Voth analyze the lessons from this important historical example.Using detailed new evidence collected from sixteenth-century archives, Drelichman and Voth examine the incentives and returns of lenders. They provide powerful evidence that in the right situations, lenders not only survive despite defaults--they thrive. Drelichman and Voth also demonstrate that debt markets cope well, despite massive fluctuations in expenditure and revenue, when lending functions like insurance. The authors unearth unique sixteenth-century loan contracts that offered highly effective risk sharing between the king and his lenders, with payment obligations reduced in bad times.A fascinating story of finance and empire, Lending to the Borrower from Hell offers an intelligent model for keeping economies safe in times of sovereign debt crises and defaults\"-- Provided by publisher.
Book
The long-run effects of religious persecution
Religious persecution is common in many countries around the globe. There is little evidence on its long-term effects. We collect data from all across Spain, using information from more than 67,000 trials held by the Spanish Inquisition between 1480 and 1820. This comprehensive database allows us to demonstrate that municipalities of Spain with a history of a stronger inquisitorial presence show lower economic performance, educational attainment, and trust today. The effects persist after controlling for historical indicators of religiosity and wealth, ruling out potential selection bias.
Journal Article
The Gender Wage Gap in Early Modern Toledo, 1550–1650
We exploit the records of a large Toledan hospital to study the compensation of female labor and the gender wage gap in early modern Castile in the context of nursing—a non-gendered, low-skill occupation in which men and women performed the same clearly defined tasks. We employ a robust methodology to estimate the value of in-kind compensation, and show it to constitute a central part of the labor contract, far exceeding subsistence requirements. Patient admissions records are used to measure nurse productivity, which did not differ across genders. Female compensation varied between 70 percent and 100 percent of male levels, with fluctuations clearly linked to relative labor scarcity. Contrary to common assumptions in the literature, we show that markets played an important role in setting female compensation in early modern Castile. The sources of the gender disparity are, therefore, likely to be found in the broader social and cultural context.
Journal Article
Duplication without constraints: Á lvarez‐ N ogal and C hamley's analysis of debt policy under P hilip II
Carlos Á lvarez‐ N ogal and C hristophe C hamley recently published an article in the E conomic H istory R eview on ‘ D ebt policy under constraints: P hilip II , the C ortes, and G enoese bankers’. In this note, we show that several claims in their article are very similar to earlier research results, published or circulated long before Á lvarez‐ N ogal and C hamley's original submission, by ourselves and other scholars (section I). These results are repeated without attribution or even mention of the earlier work. In addition, we show that what Á lvarez‐ N ogal and C hamley present as new quantitative insights are actually replications of earlier results of ours (section II). Finally, Á lvarez‐ N ogal and C hamley misrepresent our contributions, as well as those of several other scholars (section III).
Journal Article
Lending to the Borrower from Hell: Debt and Default in the Age of Philip II
What sustained borrowing without third-party enforcement in the early days of sovereign lending? Philip II of Spain accumulated towering debts while stopping all payments to his lenders four times. How could the sovereign borrow much and default often? We argue that bankers' ability to cut off Philip II's access to smoothing services was key. A form of syndicated lending created cohesion among his Genoese bankers. As a result, lending moratoria were sustained through a 'cheat-thecheater' mechanism. Our article thus lends empirical support to a recent literature that emphasises the role of bankers' incentives for continued sovereign borrowing.
Journal Article
Sons of Something: Taxes, Lawsuits, and Local Political Control in Sixteenth-Century Castile
The widespread ennoblement of the Spanish bourgeoisie in the Early Modern period has been traditionally considered one of the main causes of the “crisis of the seventeenth century.” Using a new time series of nobility cases I provide the first quantitative assessment of Castilian ennoblement. Contrary to established scholarship, I find that the tax exemptions cannot alone explain the flight to privilege. My data show that the central motivation behind ennoblement was to gain control of local governments. Although ennoblement reflected a high level of redistributive activity, there is no evidence linking it to economic stagnation in Spain.
Journal Article
The Sustainable Debts of Philip II: A Reconstruction of Castile's Fiscal Position, 1566–1596
The defaults of Philip II have attained mythical status as the origin of sovereign debt crises. We reassess the fiscal position of Habsburg Castile, deriving comprehensive estimates of revenue, debt, and expenditure from new archival data. The king's debts were sustainable. Primary surpluses were large and rising. Debt-to-revenue ratios remained broadly unchanged during Philip's reign. Castilian finances in the sixteenth century compare favorably with those of other early modern fiscal states at the height of their imperial ambitions, including Britain. The defaults of Philip II therefore reflected short-term liquidity crises, and were not a sign of unsustainable debts.
Journal Article
Duplication without constraints: Álvarez-Nogal and Chamley's analysis of debt policy under Philip II
Carlos Álvarez-Nogal and Christophe Chamley recently published an article in the Economic History Review on 'Debt policy under constraints: Philip II, the Cortes, and Genoese bankers'. In this note, we show that several claims in their article are very similar to earlier research results, published or circulated long before Álvarez-Nogal and Chamley's original submission, by ourselves and other scholars (section I). These results are repeated without attribution or even mention of the earlier work. In addition, we show that what Álvarez-Nogal and Chamley present as new quantitative insights are actually replications of earlier results of ours (section II). Finally, Alvarez-Nogal and Chamley misrepresent our contributions, as well as those of several other scholars (section III).
Journal Article
All that glitters: Precious metals, rent seeking and the decline of Spain
I argue that Spain's long-term economic stagnation in the seventeenth century and beyond was the result of a process triggered by the windfall acquisition of precious metals from American mines, and driven by the consolidation of absolutist rule and the peculiar privilege structure of Spanish society in the sixteenth century. American treasure allowed the Spanish monarchs to command large amounts of credit and pursue an expansive imperial policy unlike that of any other Early Modern nation; when the cost of the Empire increased and mineral rents fell, the Crown increased the fiscal pressure while allowing skilled human capital to migrate into the tax-sheltered but largely unproductive nobility. I first provide evidence on the role of the silver windfall and the acquisition of nobility titles in the sixteenth century; of particular interest is a new data series of nobility lawsuits constructed from the population of cases housed at the Archive of the Royal Chancery Court in Valladolid. I then develop a unified theoretical framework that explains imperial policy as an optimal response given the existing institutions and the natural resource windfall, recreates the rent-seeking path followed by the Spanish Crown when mineral rents proved insufficient, and accounts for the long-term economic backwardness that Spain experienced in the following centuries as the result of an institutional lock-in.
Journal Article
Risk sharing with the monarch: contingent debt and excusable defaults in the age of Philip II, 1556–1598
Contingent sovereign debt can create important welfare gains. Nonetheless, there is almost no issuance today. Using hand-collected archival data, we examine the first known case of large-scale use of state-contingent sovereign debt in history. Philip II of Spain entered into hundreds of contracts whose value and due date depended on verifiable, exogenous events such as the arrival of silver fleets. We show that this allowed for effective risk sharing between the king and his bankers. The existence of state-contingent debt also sheds light on the nature of defaults—they were simply contingencies over which Crown and bankers had not contracted previously.
Journal Article