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Institutions, Human Capital and Development

  • Daron Acemoglu
  • Francisco Gallego


    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

  • James A. Robinson

In this paper we revisit the relationship between institutions, human capital and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified both because of the usual omitted variable bias problems and because of differential measurement error in these variables, and that this misspecification is at the root of the very large returns of human capital, about 4 to 5 times greater than that implied by micro (Mincerian) estimates, found in some of the previous literature. Using cross-country and cross-regional regressions, we show that when we focus on historically-determined differences in human capital and control for the effect of institutions, the impact of institutions on long-run development is robust, while the estimates of the effect of human capital are much diminished and become consistent with micro estimates. Using historical and cross-country regression evidence, we also show that there is no support for the view that differences in the human capital endowments of early European colonists have been a major factor in the subsequent institutional development of these polities.

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Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 449.

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Date of creation: 2014
Date of revision:
Handle: RePEc:ioe:doctra:449
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  1. Francisco A. Gallego, 2010. "Historical Origins of Schooling: The Role of Democracy and Political Decentralization," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 228-243, May.
  2. Acemoglu, Daron & García-Jimeno, Camilo & Robinson, James A., 2012. "Finding Eldorado: Slavery and long-run development in Colombia," Journal of Comparative Economics, Elsevier, vol. 40(4), pages 534-564.
  3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
  4. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  5. Francisco Gallego & Miriam Bruhn, 2009. "Good, Bad and Ugly Colonial Activities: Do They Matter for Economic Development?," Working Papers ClioLab 6, EH Clio Lab. Instituto de Economía. Pontificia Universidad Católica de Chile.
  6. Antonio Ciccone & Giovanni Peri, 2003. "Identifying Human Capital Externalities: Theory with Applications," Working Papers 6, Barcelona Graduate School of Economics.
  7. Michalopoulos, Stelios & Papaioannou, Elias, 2012. "Pre-colonial Ethnic Institutions and Contemporary African Development," CEPR Discussion Papers 9068, C.E.P.R. Discussion Papers.
  8. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
  9. repec:oup:qjecon:v:128:y:2013:i:1:p:105-164 is not listed on IDEAS
  10. Lakshmi Iyer, 2010. "Direct versus Indirect Colonial Rule in India: Long-Term Consequences," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 693-713, November.
  11. Francisco Gallego & Robert Woodberry, 2008. "Christian Missionaries and Education in Former Colonies: How Institutions Mattered," Documentos de Trabajo 339, Instituto de Economia. Pontificia Universidad Católica de Chile..
  12. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  13. Naritomi, Joana & Soares, Rodrigo R. & Assunção, Juliano J., 2012. "Institutional Development and Colonial Heritage within Brazil," The Journal of Economic History, Cambridge University Press, vol. 72(02), pages 393-422, June.
  14. Daron Acemoglu, 2005. "Politics and Economics in Weak and Strong States," NBER Working Papers 11275, National Bureau of Economic Research, Inc.
  15. repec:tpr:qjecon:v:117:y:2002:i:4:p:1231-1294 is not listed on IDEAS
  16. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2014. "Democracy Does Cause Growth," NBER Working Papers 20004, National Bureau of Economic Research, Inc.
  17. Francisco A. Gallego & Robert Woodberry, 2010. "Christian Missionaries and Education in Former African Colonies: How Competition Mattered," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 19(3), pages 294-329, June.
  18. Nunn, Nathan, 2010. "Religious Conversion in Colonial Africa," Scholarly Articles 11986328, Harvard University Department of Economics.
  19. Gregory Clark, 2005. "The Condition of the Working Class in England, 1209-2004," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1307-1340, December.
  20. Nicola Gennaioli & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2011. "Human Capital and Regional Development," NBER Working Papers 17158, National Bureau of Economic Research, Inc.
  21. Anna Mikusheva & Brian P. Poi, 2006. "Tests and confidence sets with correct size when instruments are potentially weak," Stata Journal, StataCorp LP, vol. 6(3), pages 335-347, September.
  22. Willa Friedman & Michael Kremer & Edward Miguel & Rebecca Thornton, 2011. "Education as Liberation?," NBER Working Papers 16939, National Bureau of Economic Research, Inc.
  23. Stanley L. Engerman & Kenneth L. Sokoloff, 2011. "Economic Development in the Americas since 1500: Endowments and Institutions," NBER Books, National Bureau of Economic Research, Inc, number enge11-1, December.
  24. Ewout Frankema, 2011. "The Origins of Formal Education in sub-Saharan Africa - Was British Rule More Benign?," Working Papers 0005, Utrecht University, Centre for Global Economic History.
  25. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc.
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