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Decolonization: the Role of Changing World Factor Endowments

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  • Roberto Bonfatti

Abstract

European colonialism had two key economic aspects: the extraction of colonial wealth by colonizers, and the relevance of trade for colonial economies. I build a simple model of colonialism which puts these two elements at centre stage. By controlling policy in the colony, the colonizer can appropriate part of her wealth; the colony, however, can stage a successful revolution at a stochastic cost. I assume there is some exogenous, non-contractible policy gain from independence, so that the colonizer is forced to concede it when the cost of revolution is low. I incorporate this mechanism in a three-country, Heckscher-Ohlin model where countries (the colonizer, the colony and a third independent country) can decide whether to trade with each other, and the colonizer can threaten to stop trading with the colony if she rebels. Thus, the attractiveness of revolution and the sustainability of colonial power come to depend on the capacity of the colony to access international markets against the will of the colonizer which, in turn, depends on the distribution of world factor endowments. I present historical evidence in support of my theory. My results have important implications for the debate on the economic legacy of colonialism.

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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economic Organisation and Public Policy Discussion Papers Series with number 001.

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Date of creation: Sep 2008
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Handle: RePEc:cep:stieop:001

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

Related research

Keywords: Colonial extraction; trade; decolonization;

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References

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  1. Jack, William & Lagunoff, Roger, 2006. "Dynamic enfranchisement," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 551-572, May.
  2. Regina Grafe & Maria Alejandra Irigoin, 2006. "The Spanish Empire and its legacy: fiscal re-distribution and political conflict in colonial and post-colonial Spanish America," Economic History Working Papers 22467, London School of Economics and Political Science, Department of Economic History.
  3. Daron Acemoglu & Simon Johnson & James Robinson, 2005. "The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth," American Economic Review, American Economic Association, vol. 95(3), pages 546-579, June.
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  5. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
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  7. Herschel I. Grossman & Murat F. Iyigun, 1995. "The Profitability Of Colonial Investment," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 229-241, November.
  8. Roemer, John E, 1985. "Rationalizing Revolutionary Ideology," Econometrica, Econometric Society, vol. 53(1), pages 85-108, January.
  9. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  10. Flynn, Dennis O., 1982. "Fiscal Crisis and the Decline of Spain (Castile)," The Journal of Economic History, Cambridge University Press, vol. 42(01), pages 139-147, March.
  11. Charles Wilson, 1960. "Cloth Production And International Competition In The Seventeenth Century," Economic History Review, Economic History Society, vol. 13(2), pages 209-221, December.
  12. Grossman, Herschel I & Iyigun, Murat F, 1997. "Population Increase and the End of Colonialism," Economica, London School of Economics and Political Science, vol. 64(255), pages 483-93, August.
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Cited by:
  1. Thierry Mayer & Keith Head & John Ries, 2008. "The Erosion of Colonial Trade Linkages after Independence," Working Papers 2008-27, CEPII research center.
  2. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
    [ENDOGENOUS BOUNDARIES AND DISTRIBUTION O
    ," MPRA Paper 16473, University Library of Munich, Germany.

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