Human Capital and Income across U.S. Native American Reservations and Trust Lands

The current research emphasis on institutions as key determinants of economic performance has uncovered important questions for further research. For example, if institutions are central to economic performance, then what explains observed differences in performance across parts of one economy sharing similar institutions? This paper suggests that two broad aspects of institutions are involved - infrastructure and superstructure. It develops and then applies a simple model to 50 U.S. reservation economies to assess how the two aspects affect income. The results show that resources and resource productivity are necessary but insufficient determinants of income in reservation economies. Human capital is a constraint for two institutional reasons. First, infrastructures for fostering human capital are either inadequate or inappropriate. Second, the local superstructure seems resistant to existing infrastructures that were supposed to enhance human capital formation. Since infrastructural and superstructural aspects of institutions are competitive rather than complementary, the Nelson- Phelps channel for transmitting external technology into USRATLs appears clogged up.