"Resource Endowments, Technological Change, and Commodity Money in Colonial Peru, 1570-1800"

This paper contributes to the understanding of states’ management of commodity money in the early modern period. It focuses on the outcomes of two of the most important mints in Spanish America at the time: the Potosi mint and the Lima mint. Our analytical framework relies on a microeconomic approach that highlights the incentives to produce “good money” (money that consistently had the weight and fineness required by law, including smaller denomination coins needed for petty commerce). We show that the incentives of key players (e.g., the producers of coinage) varied over time and were particularly sensitive to the technical and organizational changes introduced by the Bourbon administration in the second half of the eighteenth century. Centralization of production, and the technological advances adopted at the Lima mint, reduced the incentives to cheat and were conducive to a better alignment of incentives between coinage producers and the monetary authority. However, such changes did not significantly affect the coinage mix. Overall, we find that the scarcity of fractional coinage was prevalent throughout the period, but the quality of the coinage produced improved over time.