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Paths of Institutional Development: A View from Economic History

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  • Karla Hoff

Abstract

This article surveys an influential new research program on historical paths of institutional development and their consequences for growth. The research program exploits the experience of European colonialism as a kind of "natural experiment" whose results bear on the way institutions affect development. The central hypothesis of this research is that societies that began with more extreme inequality were more likely to develop institutions allowing much of the population only limited access to economic opportunities. The research has uncovered a striking reversal of fortune among the areas colonized by Europe; those that were relatively rich in the 1600s are today far poorer than the areas (such as the United States and Canada) that initially were viewed as relatively undesirable. The timing of the reversal--at the onset of the Industrial Revolution, when there was probably a premium on broad participation in commercial activity--suggests that institutions associated with high inequality may be a causal factor in low aggregate incomes. This research program is still in its early stages. But studies of institutions in India using data rich enough to permit hypothesis-testing provide evidence supporting the hypotheses developed in the analysis of the European colonial experience. Copyright 2003, Oxford University Press.

Suggested Citation

  • Karla Hoff, 2003. "Paths of Institutional Development: A View from Economic History," World Bank Research Observer, World Bank Group, vol. 18(2), pages 205-226.
  • Handle: RePEc:oup:wbrobs:v:18:y:2003:i:2:p:205-226
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    Cited by:

    1. Mellati, Ali, 2008. "Uncertainty and investment in private sector: An analytical argument and a review of the economy of Iran," MPRA Paper 26655, University Library of Munich, Germany.
    2. R Gaiha & K Imai & M A Nandhi, 2005. "Millennium Development Goal of Halving Poverty in Asia and the Pacific Region: Progress, Prospects and Priorities," The School of Economics Discussion Paper Series 0507, Economics, The University of Manchester.
    3. Demeritt, Allison & Hoff, Karla, 2015. ""Small miracles"-- behavioral insights to improve development policy : World Development Report 2015," Policy Research Working Paper Series 7197, The World Bank.
    4. Avinash Dixit, 2007. "Evaluating Recipes for Development Success," World Bank Research Observer, World Bank Group, vol. 22(2), pages 131-157, June.
    5. Patricia Justino, 2012. "Shared Societies and Armed Conflict: Costs, Inequality and the Benefits of Peace," HiCN Working Papers 125, Households in Conflict Network.
    6. Raghuram G. Rajan, 2009. "Rent Preservation and the Persistence of Underdevelopment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 178-218, January.
    7. repec:eee:wdevel:v:96:y:2017:i:c:p:52-64 is not listed on IDEAS
    8. Katsushi Imai & Raghav Gaiha & Ganesh Thapa, 2009. "Has Poverty Reduction Slowed Down in the Developing World? Evidence Based on New Poverty Estimates," The School of Economics Discussion Paper Series 0902, Economics, The University of Manchester.
    9. Sheraz, Umar, 2014. "Foresight as a tool for sustainable development in natural resources: The case of mineral extraction in Afghanistan," Resources Policy, Elsevier, vol. 39(C), pages 92-100.
    10. R Gaiha & K Imai, 2005. "Do Institutions Matter in Poverty Reduction? Prospects of Achieving the MDG of Poverty Reduction in Asia," The School of Economics Discussion Paper Series 0506, Economics, The University of Manchester.
    11. Chaudhuri, Kausik & Schneider, Friedrich & Chattopadhyay, Sumana, 2006. "The size and development of the shadow economy: An empirical investigation from states of India," Journal of Development Economics, Elsevier, vol. 80(2), pages 428-443, August.
    12. Kane, Samuel & Eicher, Carl K., 2004. "Foreign Aid And The African Farmer," Staff Papers 11602, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    13. Nathan Nunn, 2009. "The Importance of History for Economic Development," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 65-92, May.
    14. Hoff, Karla & Pandey, Priyanka, 2004. "Belief systems and durable inequalities : an experimental investigation of Indian caste," Policy Research Working Paper Series 3351, The World Bank.

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