Abstract
The economic growth and development literature underlines that physical and human capital investments, and productivity are essential in this process. It has also been emphasized the importance of good institutions to foster factors of production accumulation and productivity. Considering this, the present study assesses the importance of institutional quality on the Brazilian regional development via instruments from de first Brazilian Census (1872) to control for reverse causality, measurement error, and omission of relevant variable. The empirical results support the importance of institutions on regional development, and that the main channel is through productivity.