Exploring the Mechanism of Colonial Rule

Our model predicts that domestic conditions in the metropolis determined the style of imperialism, which affected the choice of colonial policy (that could be responsive or not to colonies’ initial conditions and endowments), and in turn postcolonial institutional development. This chapter tries to trace the link of colonies’ initial endowments and their interaction with the domestic conditions in the metropolis to current institutions through their effect on the colonial strategy adopted. As argued above, the British colonial strategy varied according to local conditions and in large parts of Africa was based on indirect rule. In contrast, the French colonial policy was more uniform and based on direct rule. The empirical strategy is operationalized through the use of a suitable measure of the choice of colonial policy such as the number of Africans per European administrator, with a higher value implying a more indirect form of rule. The empirical strategy builds on a Two-stage Least Squares framework. In a first stage, the colonial strategy is explained on the basis of colonies’ initial endowments and their interaction with domestic conditions in the metropolis, whereas in a second stage, rule of law is regressed on the extent of indirect rule. The form of colonial rule is clearly found to mediate between colonies’ initial endowments and their interaction with metropolis’ domestic conditions and current institutional levels.