Institutions, Human Capital and Development

Daron Acemoglu, Francisco Gallego and James Robinson

No 449, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: In this paper we revisit the relationship between institutions, human capital and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified both because of the usual omitted variable bias problems and because of differential measurement error in these variables, and that this misspecification is at the root of the very large returns of human capital, about 4 to 5 times greater than that implied by micro (Mincerian) estimates, found in some of the previous literature. Using cross-country and cross-regional regressions, we show that when we focus on historically-determined differences in human capital and control for the effect of institutions, the impact of institutions on long-run development is robust, while the estimates of the effect of human capital are much diminished and become consistent with micro estimates. Using historical and cross-country regression evidence, we also show that there is no support for the view that differences in the human capital endowments of early European colonists have been a major factor in the subsequent institutional development of these polities.

Keywords: Economic Development; Institutions; Human Capital (search for similar items in EconPapers)
JEL-codes: I25 O10 P16 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cse, nep-gro, nep-his, nep-hpe, nep-hrm, nep-ltv and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (234)

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Related works:
Journal Article: Institutions, Human Capital, and Development * (2014)
Working Paper: Institutions, Human Capital and Development (2014)
Working Paper: Institutions, Human Capital and Development (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:449

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