The Profitabality of Colonialism

Herschel Grossman and Murat Iyigun

No 4420, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops an analytical framework for studying colonial investment from the perspective of neoclassical political economy. The distinguishing feature of colonial investment in this model is that the metropolitan government restricts the amount of investment in the colony in order to maximize the net profits earned in the colony. The model explicitly includes the threat of extralegal appropriative activities by the indigenous population in the colony. The analysis of this model identifies the conditions, where these conditions include both the technology of production and the technology of extralegal appropriation, that determine the profitability of colonialism. The analysis suggests why historically some countries but not others became colonies and why many colonies that were initially profitable subsequently become unprofitable and were abandoned. The model also has implications for the amount of investment. the allocation of resources between productive and appropriative activities, and the distribution of income in colonies.

JEL-codes: F02 F21 (search for similar items in EconPapers)
Date: 1993-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as "The Profitability of Colonial Investment" Economics & Politics, vol. 7, November 1995, pp. 229-241.

Downloads: (external link)
http://www.nber.org/papers/w4420.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4420

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4420

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().