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Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution

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  • Daron Acemoglu
  • Simon Johnson
  • James A. Robinson

Abstract

Among countries colonized by European powers during the past 500 years those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanization patterns and population density, which, we argue, proxy for economic prosperity. This reversal is inconsistent with a view that links economic development to geographic factors. According to the geography view, societies that were relatively rich in 1500 should also be relatively rich today. In contrast, the reversal is consistent with the role of institutions in economic development. The expansion of European overseas empires starting in the 15th century led to a major change in the institutions of the societies they colonized. In fact, the European intervention appears to have created an 'institutional reversal' among these societies, in the sense that Europeans were more likely to introduce institutions encouraging investment in regions that were previously poor. This institutional reversal accounts for the reversal in relative incomes. We provide further support for this view by documenting that the reversal in relative incomes took place during the 19th century, and resulted from societies with good institutions taking advantage of industrialization opportunities.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8460.

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Date of creation: Sep 2001
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Handle: RePEc:nbr:nberwo:8460

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  3. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
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    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
  4. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  5. J. Bradford De Long & Andrei Shleifer, 1993. "Princes and Merchants: European City Growth before the Industrial Revolution," NBER Working Papers 4274, National Bureau of Economic Research, Inc.
  6. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 563-606, May.
  7. Joseph M. Prince & Richard H. Steckel, 2001. "Tallest in the World: Native Americans of the Great Plains in the Nineteenth Century," American Economic Review, American Economic Association, vol. 91(1), pages 287-294, March.
  8. James A. Robinson & Daron Acemoglu, 2000. "Political Losers as a Barrier to Economic Development," American Economic Review, American Economic Association, vol. 90(2), pages 126-130, May.
  9. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
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  11. Charles I. Jones, 1997. "Population and Ideas: A Theory of Endogenous Growth," NBER Working Papers 6285, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Call for Papers: Law and Economic Development
    by Peter Klein in Organizations and Markets on 2007-02-16 15:28:31
  2. Historical Population Estimates
    by Masa in Devecondata on 2007-05-20 15:28:00
  3. Instituições importam. Ou não?
    by Leonardo Monasterio in Blog do Leonardo Monasterio on 2007-11-16 15:57:00
  4. Institutions matter. Really?
    by Leonardo Monasterio in Leonardo Monasterio's Blog on 2007-11-16 15:31:00

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  1. > Environmental and Natural Resource Economics > Climate economics > Climate and development
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