Colonizer identity, settlement conditions, and early mercantilism: do they matter for modern development?

Available from: 
October 2013
Paper author(s): 
Daniel Morales (Barna Business School)
Hugo Faría (Barry University)
James Gwartney (Florida State University)
Daniel Bennett (Florida State University)
Topic: 
History and Economics
Politics and Economy
Poverty - Inequality - Aid Effectiveness
Year: 
2013


This paper combines two institutional theories of comparative post-colonial development to examine the importance of legal-colonial origins and settlement conditions on the development of economic and political institutions that impact current per capita income. The instruments for institutional development utilized by Acemoglu et.al. (2001, 2002, 2005), namely settler mortality rates and population density in 1500, are adjusted to account for the identity of the colonizer (Klerman et.al., 2011). This procedure allows one to account simultaneously for both the impact of settlement conditions and differences among European colonizers as sources of variation in institutional development and their potential causal effect on modern per capita incomes. The British in particular exhibited less mercantilist economic policies than other European nations prior to colonial expansion, suggesting that inclusive British settlements would have been more likely than other European settlements to develop institutions and follow policies more consistent with the protection of property rights and market allocation. To account for heterogeneous post-colonial institutional development, we utilize a more comprehensive measure of economic institutions and policies than has been previously used by researchers in this area, the Fraser Institute’s Economic Freedom of the World Index. The findings indicate that: (1) the colonizer-adjusted instruments are a better predictor of contemporary institutions and income per capita than the unadjusted instruments, (2) British influence exerted a more favorable impact on institutional development than other European colonizers, ceteris paribus, and (3) the Fraser measure of economic institutions exerts a stronger impact on income per capita than constraints on the executive, the preferred institutional measure of Acemoglu and his co-authors.

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Research section: 
Lacea 2013 annual meeting
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