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This paper addresses public debt servicing in early modern economies as a component of the state’s administrative structure. Regarding Portugal as a case study, it asks: did the changing architecture of fiscal administration (fragmentation versus centrality) affect the cost-benefit of investors in public debt? 

In Iberian economies, the creditor was responsible for collecting the payment of the coupon at a tax coffer, which entailed travel costs. Therefore, the distance between the creditor’s location and the tax coffer, where the coupon was paid, affected the net return on perpetuities. In the case of Portugal, this system underwent a significant reform in the second half of the 18th century, when state expenditure was centralized in Lisbon. 

Our analysis puts forward the hypothesis that centralization adversely affected small bondholders who collected the coupon in a nearby tax coffer. However, it may have significantly reduced costs for large bondholders. The administrative reform may have changed the regional and social distribution of public debt and bolstered financial intermediation. 

This paper uses archival evidence from institutional creditors, namely monasteries and lay fraternities in Portugal - the Misericórdias -, which were also the leading credit suppliers of long-term maturities. The approach decouples the punctual servicing of debt from the state’s financial constraints and highlights the obstacles creditors face in managing large and geographically diverse portfolios. It contributes to a strand of the literature that has argued that debt credibility improves with fiscal centrality by increasing tax revenues (Dincecco 2011). However, our contribution considers that the geographical dimension of fiscal administration, and its evolution, conditions both the public expenditure on the debt service and the investors’ distribution. 

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