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Report on Colonial Origins of

Comparative Development

by D. Acemoglu, S. Johnson,J. Robinson

Maxim Ananyev

New Economic School

MAE, class 2012

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Does the difference in institutions

cause large difference in per capitaincomebetween countries?

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Institutions matter.

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Two (somewhat) contradicting

opinions:

Good institutions cause economic

growthOR

Rich countries develop betterinstitutions

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How to isolate the impact of

institutions?

Look at the countries, where the

institutions had been establishedexogenously i.e. former colonies

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Types of colonies

For extraction of wealth (bad institutions)

For settlements (good institutions)

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AJRHistorical Hypothesis

Mortality

Settlements

Modern institutions

Early institutions

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Low mortality rate key determinant

of where to settle

Where should the pilgrims go?

Guyana United States

Where to send convicts?

Gambia River Australia

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Settler colonies

Freedom of enterprise

Trade

Property rights

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Non-settlers colonies

Forced labor

High taxes

Extraction of wealth

Authoritarian rule

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Persistence of bad institutions

Forced labor:

Until 1886 in Brazil

Until 1910 in Mexico

Until 1945 in Guatemala

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OLS: Wealth and Institutions

y current per-capita GDP

R current institutions

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Institutions and wealth

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This data may not prove anything

Reverse causality

Many omitted determinants

Natural bias: seeing better institutions in richerplaces

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It is better to look at settlers mortality

ratesThe main causes of settler mortality - malaria

and yellow fever did not hurt local

population as much

They did not influence local economy onlythe institutions imposed by the foreigners.

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Least-squares estimates

R - current institutionsC - early institutions

S - settlements

M - mortality rate

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In Simple English:

Current institutions depend on early

institutions.

Early institutions depend on the European

settlements

European settlements depend on mortality

rate

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Current institutions depend on early

institutions

Dependant variable is protection against

expropriation risk in 1985 - 1995

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European settlements depend on

mortality rate

Dependant variable is Europeansettlements in 1900

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Current institutions depend on

mortality rate

Dependant variable is protection againstexpropriation risk in 1985 - 1995

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Robustness

AJR also control for:

latitude

humidity

quality of soil

temperature

ethnolinguistic fragmentation etc.

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Conclusion

This findings reveal that colonial

regime is one of the important factors

that determine modern institutionsand wealth of nations.