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Institutional Explanations of Economic Development: the Role of Precious Metals

Author

Listed:
  • Elissaios Papyrakis

    (IVM, Vrije Universiteit)

  • Reyer Gerlagh

    (IVM, Vrije Universiteit)

Abstract

Recent research has emphasized the influence of colonization on the institutional development and economic performance in former European colonies. Where European colonizers settled, they replicated the investment-conducive institutions found at home. It has been argued that a harsh disease environment and a highly urbanized native population worked against colonization. We show evidence for another significant element explaining the endogenous character of colonization strategies and the formation of institutions. We find the presence of precious metals, gold and silver, to imply an increase in settlements, and an improvement in institutional quality, even when correcting for settlements. Highly valued gold and silver reserves attracted Europeans in large numbers and resulted in an institutional upgrade of mineral-rich areas.

Suggested Citation

  • Elissaios Papyrakis & Reyer Gerlagh, 2005. "Institutional Explanations of Economic Development: the Role of Precious Metals," Working Papers 2005.131, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2005.131
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    Keywords

    Precious metals; Institutions; Economic development;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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