Institutional-cultural coherence and economic development: The case of the Spanish regions

Abstract

We explore how cultural traits coherent with liberal institutions affect economic performance. The matching between cultural traits and institutions is what we refer to as cultural-institutional coherence. We study how cultural-institutional coherence influenced the paths followed by Spanish regions after Spain's liberal reforms in the 19th century. We argue that these liberal reforms brought important changes to Spain's institutions and contributed to inducing a major rearrangement in the distribution of economic development across the country's regions. This process favored regions with cultural traits that were more coherent with liberal institutions. We address endogeneity issues using the disparate political paths that the regions followed in their distant pasts. We characterize political paths in terms of Municipal autonomy in the Middle Ages, as well as Constraints on the executive in the early modern period which, we argue, are good instruments for these cultural traits.