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Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States

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  • Stanley L. Engerman
  • Kenneth L. Sokoloff

Abstract

Many scholars are concerned with why the U.S. and Canada have been so much more successful over time than other New World economies. Since all New World societies enjoyed high levels of product per capita early in their histories, the divergence in paths can be traced back to the achievement of sustained economic growth by the U.S. and Canada during the 18th to early 19th centuries. This paper highlights the relevance of differences in the degree of inequality in wealth, human capital, and political power in accounting for the variation in the records of growth, and suggest that the roots of inequality lay in differences in the initial factor endowments of the respective colonies The large concentration of Native Americans, and the suitability of cultiva- ting sugar and other crops were key in generating extreme inequality. This encouraged the evolution of societies where small elites of European descent held highly disproportionate shares of the wealth, human capital and political power, and dominated the population economically and politically. Absent from the nearly all-inclusive list of New World colonies with these conditions were the British settlements in the northern part of the North American continent. Next, we discuss the tendencies of government policies to maintain these conditions along the respective economy's path of development. Finally, we explore the effects of inequality on the evolution of institutions conducive to participation in the commercial economy, markets and technological change during this specific era, and suggest that their greater equality in wealth, human capital, and political capital and power may have predisposed the U.S. and Canada toward earlier realization of sustained economic growth.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Historical Working Papers with number 0066.

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Date of creation: Dec 1994
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Publication status: published as in Stephen Haber, ed., How Latin America Fell Behind, Stanford: Stanford University Press, 1997.
Handle: RePEc:nbr:nberhi:0066

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Cited by:
  1. Xavier Sala-i-Martin & Arvind Subramanian, 2003. "Addressing the natural resource curse: An illustration from Nigeria," Discussion Papers 0203-15, Columbia University, Department of Economics.
  2. Dani Rodrick, 2003. "Growth Strategies," Economics working papers 2003-17, Department of Economics, Johannes Kepler University Linz, Austria.
  3. Pedro Cavalcanti Ferreira & Samuel de Abreu Pessôa & Fernando A. Veloso, 2005. "The Evolution of International Output Differences (1960-2000): From Factors to Productivity," IBMEC RJ Economics Discussion Papers 2005-11, Economics Research Group, IBMEC Business School - Rio de Janeiro.
  4. Pascali, Luigi, 2014. "The Wind of Change: Maritime Technology, Trade and Economic Development," CAGE Online Working Paper Series 195, Competitive Advantage in the Global Economy (CAGE).
  5. Arvind Subramanian & Francesco Trebbi & Dani Rodrik, 2002. "Institutions Rule," IMF Working Papers 02/189, International Monetary Fund.
  6. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
  7. Adrián Guisarri, 2003. "Intrigas del Crecimiento en Argentina," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 774-784.
  8. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse," IMF Working Papers 03/139, International Monetary Fund.

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