Daron Acemoglu1 Davide Cantoni2 Simon Johnson3 James A. Robinson4 From Ancien Régime to Capitalism: The Spread of the French Revolution as a Natural Experiment5 March 2007; Revised July 2008 1Massachusetts Institute of Technology, Department of Economics, E52-380, 50 Memorial Drive, Cambridge, MA 02142; e-mail:
[email protected]. 2Harvard University, Department of Economics, Littauer Center, 1805 Cambridge Street, Cambridge, MA 02138; e- mail:
[email protected]. 3Massachusetts Institute of Technology and International Monetary Fund, Sloan School of Management, Cambridge, MA 02319; e-mail:
[email protected]. 4Harvard University, Department of Government, IQSS, 1737 Cambridge Street N309, Cambridge, MA 01238; e- mail:
[email protected]. 5We thank Robert Schneider, three anonymous referees, Regina Baar, Jared Diamond and Philip Hoffman for their comments and suggestions and Leopoldo Fergusson, Camilo García, Tarek Hassan, Jutta Hoppe and Mike Kapps for excellent research assistance. 1 Summary In this paper we exploit the invasion of Europe, particularly Germany, by French Revolutionary armies as a “natural experiment” to investigate the causal effect of the institutions of the ancien régime on economic development. A central hypothesis which can account for comparative development within Europe is that economic growth emerged first in places which earliest escaped ancien régime and feudal institutions. However, though there is a correlation between these two events, this does not demonstrate that it was the collapse of the ancien régime that caused the rise of capitalism; this is because there may be problems of reverse causation and omitted variable bias. We show how institutional reforms brought by the French in Germany can be exploited to resolve these problems.