Immigration and the origins of regional inequality: Government-sponsored European migration to southern Brazil before World War I

This paper studies the long-term consequences of the government-sponsored programs of European immigration to Southern Brazil before the Great War. We find that the municipalities closer to the original sites of nineteenth century government sponsored settlements (colônias) have higher per capita income, less poverty and dependence on Bolsa Família cash transfers, better health and education outcomes; and for the areas close to German colonies, also less inequality of income and educational outcomes than otherwise. Since that is a reduced form relationship, we then attempt to identify the relative importance of more egalitarian landholdings and higher initial human capital in determining those outcomes. Our findings are suggestive that more egalitarian land distribution played a more important role than higher initial human capital in achieving the good outcomes associated with closeness to a colônia.

► During the century before the Great War, the Brazilian government subsidized European settlements in Rio Grande do Sul (RS).
► Historical records show that some official settlements had more egalitarian landholdings than other parts of the state.
► The areas of European settlement in RS also had more human capital than other parts of that state.
► Contemporary data show that RS municipalities closer to those official settlements have better socioeconomic outcomes.
► Regression analysis suggests that better outcomes are more correlated to equal landholdings than to higher human capital.