The colonial legacy in India: How persistent are the effects of historical institutions?

Using updated data, we analyze the long-run effects of two British colonial institutions established in India. Iyer (2010) showed that areas under direct colonial rule had fewer schools, health centers, and roads than areas under indirect colonial rule. Two decades later, we find that these differences have been eliminated, and that the gaps in poverty, health and educational attainment are also smaller. Banerjee and Iyer (2005) found lower agricultural investments and productivity in areas with landlord-based colonial land tenure systems. Our updated data finds that only some of these differences have been eliminated, while others have remained constant and even widened. Consistent with this lack of convergence, we find that non-landlord areas continue to have higher educational attainment and lower poverty rates six decades after the end of colonial rule. We conclude that the impact of colonial institutions can eventually fade away under the influence of targeted policies.