Shipwrecked by rents

The trade route between Manila and Mexico was a monopoly of the Spanish Crown for more than 250 years. The ships that sailed this route — the Manila Galleons, were “the richest ships in all the oceans”, but much of the wealth sank at sea and remains undiscovered. We introduce a newly constructed dataset of all of the ships that traveled this route, and construct a model showing how monopoly rents that allowed widespread bribery would have led to inefficient cargo loading and delayed ship departure, which increased the probability of shipwreck beyond normal levels. Empirically, we demonstrate not only that ships that sailed late were more likely to shipwreck, but also that the effect is stronger for galleons carrying more valuable, higher-rent, cargo. This sheds new light on the relationship between, and social costs from, monopoly rents and corruption.