Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective

Daniel Bennett, Hugo Faria, James Gwartney and Daniel Morales
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Daniel Bennett: Florida State University
Hugo Faria: University of Miami
Daniel Morales: Florida State University

No 2016-07, Working Papers from University of Miami, Department of Economics

Abstract: Existing literature suggests that either colonial settlement conditions or the identity of colonizer were influential in shaping the post-colonial institutional environment, which in turn has impacted long-run economic development, but has treated the two potential identification strategies as substitutes. We argue that the two factors should instead be treated as complementary and develop a novel identification strategy that simultaneously accounts for both settlement conditions and colonizer identity to estimate the potential causal impact of a broad cluster of economic institutions on log real GDP per capita for a sample of former colonies. Using population density in 1500 as a proxy for settlement conditions, we find that the impact of settlement conditions on institutional development is much stronger among former British colonies than colonies of the other major European colonizers. Conditioning on several geographic factors and ethno-linguistic fractionalization, our baseline 2SLS estimates suggest that a standard deviation increase in economic institutions is associated with a three-fourths standard deviations increase in economic development. Our results are robust to a number of additional control variables, country subsample exclusions, and alternative measures of institutions, GDP, and colonizer classifications. We also find evidence that geography exerts both an indirect and direct effect on economic development.

Keywords: Colonization; Comparative Economic Development; Growth; Geography; Institutions Publication Status: Working Paper (search for similar items in EconPapers)
JEL-codes: F54 O1 O4 P5 (search for similar items in EconPapers)
Date: 2016-11-12
New Economics Papers: this item is included in nep-evo, nep-gro, nep-his, nep-hpe and nep-pke
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https://www.herbert.miami.edu/_assets/files/repec/WP2016-07.pdf First version, 2016 (application/pdf)

Related works:
Journal Article: Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mia:wpaper:2016-07

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