Investing in streets and cities can shape the economy for centuries. Economists are now showing how one-time investment in education can last as long.
Jesuits came late to the home of the Guarani, where Brazil, Paraguay and Argentina meet. Their missions, however, flourished until 1767, when King Charles III. From Spain all Jesuits from the Spanish Empire expelled.
However, even 250 years later, people living near the ruins of Jesuit missions spend 10 to 15 percent more education and earn 10 percent more than residents of equivalent cities without missions. This emerges from a study published in the Quarterly Journal of Economics.
To measure an intangible asset over centuries requires clever techniques. It also requires the perfect natural experiment. The economist of the University of British Columbia, Felipe Valencia Caicedo, relied on both.
The analysis of Valencia is one of the most remarkable studies showing how income from education and training bridges generations and even centuries.
A historical experiment
You need a randomized experiment to really separate education from the confusing factors that usually accompany it. They would draw entire communities and throw them into an isolated region. They would divide them into equivalent treatment and control groups and watch carefully every one or two epochs.
Valencia could not do this for obvious ethical and practical reasons. But he found the next best thing. The 34-year-old Colombian, who studied economics in Brown, Yale, the London School of Economics and Pompeu Fabra University in Barcelona, has long been fascinated by the colonial past of Latin America. He focused on this isolated archipelago of the Jesuit missions because they were free of complications that would make it impossible to detect the impact of missions established in the megalopolis of Sao Paulo.
Founded in 1534, three decades before the construction of its first South American mission, the Jesuit movement was developed with its technology and methodology for its time. Important for this study was that members focused on training. Their Guarani missions were seen as an egalitarian, utopian experiment that earned such famous fans as Voltaire and Rousseau.
During the 30 missions that Valencia studied, the Jesuits taught blacksmithing, arithmetic and embroidery to indigenous men and women of the Guarani tribe. These efforts were stopped after the Jesuits were expelled.
The clean break was the perfect starting point for an economic analysis.
"Moral considerations aside, for us in economics, colonialism is a beautiful historical experiment to study the things that are important to us," said Valencia. "We are not colonialists … but we can study these effects."
Measuring the effects
By compiling data from archives of the Vatican, Spain, Paraguay and Argentina, Valencia has found extensive evidence that the education of the Jesuits has continued to influence the education and society of the Guarani, who lived in the immediate vicinity of the missions.
Per 100 kilometers closer to a mission, poverty rates fall by 10 percent and school education increases by about 0.7 years. The effect was sharper 75 or 100 years ago, according to historical data, but as national literacy approaches the maximum of 100 percent, the differences become flatter.
For variable by variable, Valencia has experienced the same positive trend. This is no confirmation of the methods of the Jesuits. He said his work shows the enduring power of investing in people, not the enduring power of colonialism or Catholicism.
"This paper does not say missions are good," said Valencia. "This paper does not say that Catholicism was good or had no negative impact. This article states that although humans converted indigenous peoples to Catholicism while they did so, they also taught them skills. "
Princeton economist Leonard Wantchekon, who worked with Marko Klašnja of Georgetown and Natalija Novta of the International Monetary Fund, used other methods, but came to a similar conclusion when analyzing the long-term effects of early 20th-century mission schools in Benin.
Their analysis, published in the same journal, found the benefits of education contagious – one possible reason why the benefits of education persist for generations.
"Children whose parents did not go to school but lived close to those who went to school were as good as those whose parents went to school," Wantchekon said. "In other words, aspirations played an important role in intergenerational mobility."
The University of Michigan economist Hoyt Bleakley has published several influential papers that measure the long-term effects of circumstances ranging from the extinction of hookworms in the American South to river portage on the east coast. He said the work of Wantchekon and Valencia shows the durability of some human capital investment.
"These relatively early human capital-building institutions seem to leave a pretty significant footprint for generations," Bleakley said. "Maybe for centuries." According to Bleakley, it is difficult to separate the impact of education from that of the cultures and institutions that are accepted by educated people.
Any armchair statistician can tell you that these results are almost useless if they reflect a third variable, such as the desired location or high population density, which explains both the location of the mission and the level of education. That is why, like all economists doing this kind of research, Valencia has made an extraordinary effort to bring correlation and causation apart.
Because they had arrived after the Franciscans and other countries, the Jesuits were forced to build their missions in inconspicuous places. Today, the settlements near the missions are no more densely populated than the surrounding areas. The analysis of Valencian satellite data also shows that there are no temperatures, no terrain or no climate that is more favorable for cultivating crops. They are also not closer to rivers or the coast.
Valencia found a number of natural control groups. For example, people who have immigrated to these communities do not show the same educational trends as the indigenous people.
The Franciscans helped too. The order of mendicant orders had been longer in the area than the Jesuits. It was not reported. But the Franciscans focused more on poverty and health than on education and vocation. Valencia noted that families' economic and educational outcomes may not have been so different, depending on the distance to the missions of that order.
Perhaps the Jesuits had a supernatural ability to select places that later educated people could attend? We can also exclude that. There were numerous places where the Jesuits started a mission, but they quickly gave up for reasons that had nothing to do with their economic viability. Compared to similar locations with long-lasting Jesuit missions, these places had no measurable effect.
Finally, Valencia excluded the institutions that development economists consider likely drivers in such cases. In Brazil, Argentina, and Paraguay, over the centuries he studied, there were very different governments, records, and institutional experiences, but all showed similar tendencies.
Valencia did not exclude other possible explanations. He also explained some reasons why areas near the missions were still successful at higher rates today.
People approaching the missions would rather pass on knowledge from generation to generation. The Valencia Survey has shown that this applies not only to the skills taught by the missionaries, such as embroidery, diaries and bookkeeping, but also to traditional medicine and folklore, which are not directly related to the Jesuit mission.
Historical descriptions of the missions emphasize the vocational training that went beyond agriculture into the craft and service industries. Today, the areas near the missions are more industrialized than their neighbors, and they tend to employ more people in industries related to professions highlighted by the missionaries, such as blacksmithing and teaching.
This should not mean that the differences remained constant or that the story is destiny. Areas that are close to the missions have accepted innovation rather than their peers. Between 1996 and 2006, farmers closer to the missions in Brazil were quicker to plant new genetically modified soybeans than the farther afield.
"It's not that things are unchanging," said Valencia. "Precisely because of this historical human capital shock, people can change faster and adapt to change faster."
The continuing pedagogical and cultural impact of this historic shock – an educational mission shortened about ten years before the US Revolutionary War – is strong evidence that investing in people brings long-term returns.