The international literature has widely debated the role of institutions in determining the differences in development across countries. Since institutions considered crucial in this process do not vary within Brazil, the development contrasts observed among Brazilian municipalities raise a puzzle to the literature. This dissertation aims to analyze the roots and implications of specific local institutions under constant macro-institutions. We investigate causes and consequences of the variation in de facto institutions, within a constant de jure institutional setting. For this purpose, we explore the role of rent-seeking episodes in colonial Brazil - the sugar-cane colonial cycle and the gold colonial cycle - as determinants of the quality of four specific current local institutions: inequality in the distribution of land, political concentration, governance practices and access to justice. In addition to that, we explore the institutional shock represented by these historical events to evaluate the impact of these different institutional variables on economic development at the municipality level. We investigate whether the current development pattern observed within Brazil reflects, in some dimension, local institutions determined by different colonial heritages.