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Did History Breed Inequality? Colonial Factor Endowments and Modern Income Distribution

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Author Info
Matthew J. Baker () (Hunter College, City University of New York)
Christa N. Brunnschweiler () (CER-ETH Center of Economic Research at ETH Zurich, Switzerland)
Erwin H. Bulte () (Development Economics Group, Wageningen University and Department of Economics, Tilburg University)

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Abstract

We explore the relation between historical population density in former colonies and modern income distribution. A theoretical model highlights the potentially opposing effects of native population density on incentives for colonists to conquer or settle in new territories. While an abundant supply of native labor is an “asset” that drives up land rents, it is also a “liability” that makes land acquisition by colonists more difficult and reduces returns to peacable migration. Conflicts over land, sowing the seeds for inequality by creating a landed élite living off rents, are especially likely to emerge for intermediate native population densities. Results are confirmed by detailed empirical tests highlighting the curvilinear relationship between native population density and modern income inequality. Finally, using population density as an instrument for inequality in the former colonies, we demonstrate that there is no causal relationship running from income distribution to economic growth.

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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series Economics working paper series with number 08/86.

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Length: 65 pages
Date of creation: Jun 2008
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Handle: RePEc:eth:wpswif:08-86

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Related research
Keywords: inequality; growth; factor endowments; population density; conflict; colonization;

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Find related papers by JEL classification:
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
N30 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth - - - General, International, or Comparative
N50 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - General, International, or Comparative

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  7. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09. [Downloadable!]
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  8. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December. [Downloadable!] (restricted)
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  9. Kenneth L. Sokoloff & Stanley L. Engerman, 2000. "Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 217-232, Summer. [Downloadable!] (restricted)
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  14. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, Oxford University Press, vol. 10(3), pages 565-91, September.
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  1. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," Economics working paper series 08/89, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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