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Reversal Of Fortune: Geography And Institutions In The Making Of The Modern World Income Distribution

  • Daron Acemoglu
  • Simon Johnson
  • James A. Robinson

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 weighs against a view that links economic development to geographic factors. Instead, we argue that the reversal reflects changes in the institutions resulting from European colonialism. The European intervention appears to have created an "institutional reversal" among these societies, meaning 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 late eighteenth and early nineteenth centuries, and resulted from societies with good institutions taking advantage of the opportunity to industrialize. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 117 (2002)
Issue (Month): 4 (November)
Pages: 1231-1294

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Handle: RePEc:tpr:qjecon:v:117:y:2002:i:4:p:1231-1294
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  1. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  2. 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.
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  12. Bairoch, Paul, 1995. "Economics and World History," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226034638.
  13. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
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  15. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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