Three essays on the economic history of Latin America: Fiscal federalism, causes and consequences

This dissertation explores the long run roots of today's high levels of regional inequality in Brazil. In particular, I study the role of certain provisions of the 1891 Constitution that "decentralized" fiscal decisions to the level of states. The Constitution enabled individual Brazilian states to levy export taxes and keep the revenue, as well as independently seek financial capital in international capital markets. Richer states, as determined by the region-based comparative advantages in certain crops, took advantage of the constitutional provisions, accentuating the high levels of regional inequality in Brazil at the twentieth century.;Chapter one presents a formal game theoretic model in which a state government negotiates with a central government over revenue sharing and taxing authority. The results of the model show that more economically autonomous and richer local governments will keep a high share of public revenue. Brazil's local elites had more autonomy to exploit their endowments which increased their bargaining power to change the rules of the game in the advantage of their states. I show that the effect of the Constitution was immediate as richer states could collect more state public revenue only after 1891. I also contrast the Brazilian experience with Mexico's, a country with more fiscal centralization.;Chapter two studies the determinants of the cost of capital of Brazil's states from 1891 to 1930. The results suggest that Brazilian states with substantial export capacity issued more debt and obtained better financial terms when contracting international debt. Most of the state bonds were guaranteed by state public revenue; so states with healthy finances had low default risk and paid lower interest rates.;Chapter three analyzes public goods that state governments provided. I show that states with suitable endowments for commodities with high international prices could collect more export tax revenues. My results find that export tax revenues determined the capacity of the states to spend on public goods that are conductive to economic growth like education and public works.