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Initial Conditions, Institutional Dynamics and Economic Performance: Evidence from the American States

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  • Daniel Berkowitz

    (University of Pittsburgh)

  • Karen Clay

    (The Heinz School, Carnegie Mellon University)

Abstract

Using state-level data from the United States, we find that differences in colonial legal institutions affect the current quality of state legal institutions. These differences in colonial legal institutions arose because some states were settled by Great Britain, a common law country, and other states were settled by France, Spain, and Mexico, all civil law countries. To explain these findings, we develop a transplant-civil law hypothesis that highlights the disruption associated with large-scale legal transplantation and the possible relative inefficiencies of colonial civil law. We find strong support for the transplant-civil law hypothesis. Our results are robust to inclusion of additional variables capturing climate, geography, initial population and resource endowments. Given the 150-200 year gap between the initial conditions and the measures of the current quality of legal institutions, we provide indirect evidence on the persistence of legal institutions. We then use initial legal systems and climate to quantify the substantial impact of current institutions on current economic performance.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by American Law & Economics Association in its series American Law & Economics Association Annual Meetings with number 1083.

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Handle: RePEc:bep:alecam:1083

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Cited by:
  1. Noel Maurer & Lakshmi Iyer, 2008. "The Cost of Property Rights: Establishing Institutions on the Philippine Frontier Under American Rule, 1898-1918," NBER Working Papers 14298, National Bureau of Economic Research, Inc.
  2. Naritomi, Joana & Soares, Rodrigo R. & Assunção, Juliano J., 2009. "Institutional Development and Colonial Heritage within Brazil," IZA Discussion Papers 4276, Institute for the Study of Labor (IZA).
  3. Andres Rosas & Juan Mendoza, 2004. "The economic effects of geography Colombia as a case study," DOCUMENTOS DE ECONOMÍA 003584, UNIVERSIDAD JAVERIANA - BOGOTÁ.
  4. Luciano Nakabashi & Adolfo Sachsida & Ana Elisa Gonçalves Pereira, 2011. "Institutions and growth: a developing country case study," Working Papers 0116, Universidade Federal do Paraná, Department of Economics.
  5. Edward L. Glaeser & Raven Saks, 2004. "Corruption in America," NBER Working Papers 10821, National Bureau of Economic Research, Inc.
  6. Efraim Benmelech & Tobias J. Moskowitz, 2010. "The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century," Journal of Finance, American Finance Association, vol. 65(3), pages 1029-1073, 06.
  7. Lagerlöf, Nils-Petter & Basher, Syed A., 2005. "Geography, population density, and per-capita income gaps across US states and Canadian provinces," MPRA Paper 369, University Library of Munich, Germany, revised 28 Sep 2006.
  8. Basher, Syed A. & Lagerlöf, Nils-Petter, 2008. "Per-capita income gaps across US states and Canadian provinces," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1173-1187, September.
  9. Joana Naritomi & Rodrigo R. Soares & Juliano J. Assunção, 2007. "Rent Seeking and the Unveiling of 'De Facto' Institutions: Development and Colonial Heritage within Brazil," NBER Working Papers 13545, National Bureau of Economic Research, Inc.

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