American Economic Association The Colonial Origins of Comparative Development: An Empirical Investigation Author(s): Daron Acemoglu, Simon Johnson, James A. Robinson Source: The American Economic Review, Vol. 91, No. 5 (Dec., 2001), pp. 1369-1401 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/2677930 Accessed: 21/05/2009 16:59 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=aea. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact [email protected]. American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to The American Economic Review. http://www.jstor.org The Colonial Origins of Comparative Development: An EmpiricalInvestigation By DARON ACEMOGLU,SIMON JOHNSON,AND JAMESA. ROBINSON* We exploit differences in European mortalityrates to estimate the effect of institu- tions on economic performance. Europeans adopted very different colonization policies in differentcolonies, with differentassociated institutions.In places where Europeansfaced high mortalityrates, they could not settle and were more likely to set up extractive institutions.These institutionspersisted to the present. Exploiting differencesin Europeanmortality rates as an instrumentfor currentinstitutions, we estimate large effects of institutions on income per capita. Once the effect of institutionsis controlledfor, countries in Africa or those closer to the equatordo not have lower incomes. (JEL 011, P16, P51) What are the fundamental causes of the tionary policies will invest more in physical large differences in income per capita across and human capital, and will use these factors countries? Although there is still little con- more efficiently to achieve a greater level of sensus on the answer to this question, differ- income (e.g., Douglass C. North and Robert ences in institutions and property rights have P. Thomas, 1973; Eric L. Jones, 1981; North, received considerable attention in recent 1981). This view receives some support from years. Countries with better "institutions," cross-country correlations between measures more secure property rights, and less distor- of property rights and economic development (e.g., Stephen Knack and Philip Keefer, 1995; Paulo Mauro, 1995; Robert E. Hall and * Acemoglu: Department of Economics, E52-380b, Charles I. Jones, 1999; Dani Rodrik, 1999), Massachusetts Institute of Technology, Cambridge, MA and from a few micro studies that investigate 02319, and Canadian Institute for Advanced Research the relationship between property rights and (e-mail: [email protected]);Johnson: Sloan School of Man- agement, Massachusetts Institute of Technology, Cam- investment or output (e.g., Timothy Besley, bridge, MA 02319 (e-mail: [email protected]);Robinson: 1995; ChristopherMazingo, 1999; Johnson et Department of Political Science and Department of Eco- al., 1999). nomics, 210 BarrowsHall, University of California,Berke- At some level it is obvious that institutions ley, CA 94720 (e-mail: [email protected]). We thank Joshua Angrist, Abhijit Banerjee, Esther Duflo, matter. Witness, for example, the divergent Stan Engerman, John Gallup, Claudia Goldin, Robert paths of North and South Korea, or East and Hall, Chad Jones, Larry Katz, Richard Locke, Andrei West Germany, where one part of the country Shleifer, Ken Sokoloff, Judith Tendler, three anonymous stagnated under central planning and collec- referees, and seminar participants at the University of tive ownership, while the other prospered California-Berkeley, Brown University, Canadian Insti- tute for Advanced Research, Columbia University, Har- with private property and a market economy. vard University, Massachusetts Institute of Technology, Nevertheless, we lack reliable estimates of National Bureau of Economic Research, Northwestern the effect of institutions on economic perfor- University, New York University, Princeton University, mance. It is quite likely that rich economies University of Rochester, Stanford University, Toulouse University, University of California-Los Angeles, and the choose or can afford better institutions. Per- World Bank for useful comments. We also thank Robert haps more important, economies that are dif- McCaa for guiding us to the data on bishops' mortality. ferent for a variety of reasons will differ both 1369 1370 THE AMERICANECONOMIC REVIEW DECEMBER2001 in their institutions and in their income per current institutions in these countries.2 More capita. specifically, our theory can be schematically To estimate the impact of institutionson eco- summarizedas nomic performance,we need a source of exog- enous variationin institutions.In this paper,we (potential) settler propose a theory of institutional differences > settlements mortality among countries colonized by Europeans,' and exploit this theory to derive a possible source of early current exogenous variation. Our theory rests on three premises: institutions institutions 1. There were different types of colonization current policies which createddifferent sets of insti- performance. tutions.At one extreme,European powers set up "extractivestates," exemplified by the Bel- We use data on the mortalityrates of soldiers, gian colonizationof the Congo. These institu- bishops, and sailors stationedin the colonies be- tions did not introducemuch protectionfor tween the seventeenthand nineteenthcenturies, privateproperty, nor did they provide checks largely based on the work of the historianPhilip and balances against governmentexpropria- D. Curtin.These give a good indicationof the tion. In fact, the mainpurpose of the extractive mortalityrates faced by settlers.Europeans were state was to transferas much of the resources well informedabout these mortalityrates at the of the colony to the colonizer. time, even though they did not know how to At the other extreme, many Europeansmi- control the diseases that caused these high mor- grated and settled in a number of colonies, tality rates. creating what the historian Alfred Crosby Figure 1 plots the logarithm of GDP per (1986) calls "Neo-Europes."The settlerstried capita today against the logarithmof the settler to replicateEuropean institutions, with strong mortalityrates per thousandfor a sample of 75 emphasis on private property and checks countries(see below for data details). It shows a againstgovernment power. Primaryexamples strong negative relationship. Colonies where of this include Australia,New Zealand,Can- Europeans faced higher mortality rates are to- ada, and the UnitedStates. day substantiallypoorer than colonies that were 2. The colonization strategy was influenced by healthy for Europeans. Our theory is that this the feasibility of settlements.In places where relationshipreflects the effect of settler mortal- the disease environmentwas not favorableto ity working throughthe institutionsbrought by Europeansettlement, the cards were stacked Europeans.To substantiatethis, we regress cur- against the creationof Neo-Europes,and the rent performance on current institutions, and formation of the extractive state was more instrumentthe latter by settler mortality rates. likely. Since our focus is on propertyrights and checks 3. The colonial state and institutions persisted against government power, we use the protec- even after independence. tion against "risk of expropriation"index from Political Risk Services as a proxy for institu- Based on these three premises, we use the tions. This variable measures differences in in- mortality rates expected by the first European stitutions originating from different types of settlers in the colonies as an instrument for states and state policies.3 There is a strong 1 By "colonial experience" we do not only mean the 2 Note that althoughonly some countrieswere colonized, direct control of the colonies by Europeanpowers, but more there is no selection bias here. This is because the question generally, Europeaninfluence on the rest of the world. So we are interested in is the effect of colonization policy according to this definition, Sub-Saharan Africa was conditional on being colonized. strongly affected by "colonialism" between the sixteenth 3Government expropriationis not the only institutional and nineteenthcenturies because of the Atlantic slave trade. feature that matters. Our view is that there is a "cluster of VOL.91 NO. 5 ACEMOGLUET AL.: THE COLONIALORIGINS OF DEVELOPMENT 1371 10 'Ivp LO) < PANGA tl FJ GUY AGO Xi PAKIND SDN GMB 0a co BGD NERMD NGA TA tl 6 ETH SI n- 6 0 2 4 6 8 Logof SettlerMortality FIGURE 1. REDUCED-FORM