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Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective

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  • Daniel L. Bennett

    (Florida State University)

  • Hugo J. Faria

    (University of Miami)

  • James D. Gwartney

    (Florida State University)

  • Daniel R. Morales

    (Florida State University)

Abstract

Existing literature suggests that either colonial settlement conditions or the identity of colonizer were influential in shaping the post-colonial institutional environment, which in turn has impacted long-run economic development, but has treated the two potential identification strategies as substitutes. We argue that the two factors should instead be treated as complementary and develop a novel identification strategy that simultaneously accounts for both settlement conditions and colonizer identity to estimate the potential causal impact of a broad cluster of economic institutions on log real GDP per capita for a sample of former colonies. Using population density in 1500 as a proxy for settlement conditions, we find that the impact of settlement conditions on institutional development is much stronger among former British colonies than colonies of the other major European colonizers. Conditioning on several geographic factors and ethno-linguistic fractionalization, our baseline 2SLS estimates suggest that a standard deviation increase in economic institutions is associated with a three-fourths standard deviations increase in economic development. Our results are robust to a number of additional control variables, country subsample exclusions, and alternative measures of institutions, GDP, and colonizer classifications. We also find evidence that geography exerts both an indirect and direct effect on economic development.

Suggested Citation

  • Daniel L. Bennett & Hugo J. Faria & James D. Gwartney & Daniel R. Morales, 2016. "Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective," Working Papers 2016-07, University of Miami, Department of Economics.
  • Handle: RePEc:mia:wpaper:2016-07
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    More about this item

    Keywords

    Colonization; Comparative Economic Development; Growth; Geography; Institutions Publication Status: Working Paper;
    All these keywords.

    JEL classification:

    • F54 - International Economics - - International Relations, National Security, and International Political Economy - - - Colonialism; Imperialism; Postcolonialism
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • P5 - Economic Systems - - Comparative Economic Systems

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