• Acemoglu, D., Cantoni, D., Johnson, S. and Robinson, J. (2011) “The Consequences of Radical Reform: The French Revolution,” American Economic Review, 101(7), pp. 3286–3307.
    • Abstract

      The French Revolution had a momentous impact on neighboring countries. It removed the legal and economic barriers protecting oligarchies, established the principle of equality before the law, and prepared economies for the new industrial opportunities of the second half of the 19th century. We present within-Germany evidence on the long-run implications of these institutional reforms. Occupied areas appear to have experienced more rapid urbanization growth, especially after 1850. A two-stage least squares strategy provides evidence consistent with the hypothesis that the reforms instigated by the French had a positive impact on growth.

  • Acemoglu, D. and Johnson, S. (2005) “Unbundling Institutions,” Journal of Political Economy, 113(5), pp. 949–995.
    • Abstract

      This paper evaluates the importance of “property rights institutions,” which protect citizens against expropriation by the government and powerful elites, and “contracting institutions,” which enable private contracts between citizens. We exploit exogenous variation in both types of institutions driven by colonial history and document strong first-stage relationships between property rights institutions and the determinants of European colonization strategy (settler mortality and population density before colonization) and between contracting institutions and the identity of the colonizing power. Using this instrumental variable approach, we find that property rights institutions have a first-order effect on long-run economic growth, investment, and financial development. Contracting institutions appear to matter only for the form of financial intermediation. A possible explanation for this pattern is that individuals often find ways of altering the terms of their formal and informal contracts to avoid the adverse effects of weak contracting institutions but find it harder to mitigate the risk of expropriation in this way.

  • Acemoglu, D., Johnson, S. and Robinson, J. (2005) “The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth,” The American Economic Review. American Economic Association, 95(3), pp. pp. 546–579. Available at: Link.
    • Abstract

      The rise of Western Europe after 1500 is due largely to growth in countries with access to the Atlantic Ocean and with substantial trade with the New World, Africa, and Asia via the Atlantic. This trade and the associated colonialism affected Europe not only directly, but also indirectly by inducing institutional change. Where "initial" political institutions (those established before 1500) placed significant checks on the monarchy, the growth of Atlantic trade strengthened merchant groups by constraining the power of the monarchy, and helped merchants obtain changes in institutions to protect property rights. These changes were central to subsequent economic growth.

  • Acemoglu, D., Johnson, S. and Robinson, J. (2002) “Reversal of fortune: geography and development in the making of the modern world income distribution,” Quarterly Journal of Economics, 117(4), pp. 1231–1294.
    • Abstract

      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.

  • Acemoglu, D., Johnson, S. and Robinson, J. (2001) “The colonial origins of economic development: an empirical investigation,” American Economic Review, 91(5), pp. 1369–1401.
    • Abstract

      We exploit differences in European mortality rates to estimate the effect of institutions on economic performance. Europeans adopted very different colonization policies in different colonies, with different associated institutions. In places where Europeans faced high mortality rates, they could not settle and were more likely to set up extractive institutions. These institutions persisted to the present. Exploiting differences in European mortality rates as an instrument for current institutions, we estimate large effects of institutions on income per capita. Once the effect of institutions is controlled for, countries in Africa or those closer to the equator do not have lower incomes.

  • Acemoglu, D. and Robinson, J. A. (2000) “Political losers as a barrier to economic development,” The American Economic Review. JSTOR, 90(2), pp. 126–130.
  • Acemoglu, D. and Robinson, J. A. (2000) “Why did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective,” Quarterly Journal of Economics. MIT Press, 115(4), pp. 1167–1199.
    • Abstract

      During the nineteenth century most Western societies extended voting rights, a decision that led to unprecedented redistributive programs. We argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution. Political transition, rather than redistribution under existing political institutions, occurs because current transfers do not ensure future transfers, while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution. Our theory also offers a novel explanation for the Kuznets curve in many Western economies during this period, with the fall in inequality following redistribution due to democratization.

  • Albouy, D. (2012) “The Colonial Origins of Comparative Development: An Empirical Investigation: Comment,” American Economic Review, 102(6), pp. 3059–3076.
    • Abstract

      In a seminal contribution, Acemoglu, Johnson, and Robinson (2001) evaluate the effect of property rights institutions on national income using estimated mortality rates of early European settlers as an instrument for the risk of capital expropriation. Returning to their original sources, I find the settler mortality data suffer from a number of inconsistencies, comparability problems, and questionable geographic assignments. When various methods are used to deal with these issues, the first-stage relationship between mortality and expropriation risk is no longer robust and typically insignificant. Consequently instrumental variable estimates are unreliable and suffer from weak instrument pathologies.

  • Algan, Y. and Cahuc, P. (2010) “Inherited Trust and Growth,” American Economic Review, 100(5), pp. 2060–92. Available at: Link.
    • Abstract

      This paper develops a new method to uncover the causal effect of trust on economic growth by focusing on the inherited component of trust and its time variation. We show that inherited trust of descendants of US immigrants is significantly influenced by the country of origin and the timing of arrival of their forebears. We thus use the inherited trust of descendants of US immigrants as a time-varying measure of inherited trust in their country of origin. This strategy allows to identify the sizeable causal impact of inherited trust on worldwide growth during the twentieth century by controlling for country fixed effects. (JEL N11, N12, N31, N32, O47, Z13)

  • Banerjee, A. and Iyer, L. (2005) “History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India,” The American Economic Review. American Economic Association, 95(4), pp. pp. 1190–1213. Available at: Link.
    • Abstract

      We analyze the colonial land revenue institutions set up by the British in India, and show that differences in historical property rights institutions lead to sustained differences in economic outcomes. Areas in which proprietary rights in land were historically given to landlords have significantly lower agricultural investments and productivity in the post-independence period than areas in which these rights were given to the cultivators. These areas also have significantly lower investments in health and education. These differences are not driven by omitted variables or endogeneity problems; they probably arise because differences in historical institutions lead to very different policy choices.

  • Banerjee, A. V. and Duflo, E. (2003) “Inequality and Growth: What Can the Data Say?,” Journal of Economic Growth. Springer Netherlands, 8(3), pp. 267–299. Available at: Link.
    • Abstract

      This paper describes the correlations between inequality and the growth rates in cross-country data. Using non-parametric methods, we show that the growth rate is an inverted U-shaped function of net changes in inequality: changes in inequality (in any direction) are associated with reduced growth in the next period. The estimated relationship is robust to variations in control variables and estimation methods. This inverted U-curve is consistent with a simple political economy model but it could also reflect the nature of measurement errors, and, in general, efforts to interpret this evidence causally run into difficult identification problems. We show that this non-linearity is sufficient to explain why previous estimates of the relationship between the level of inequality and growth are so different from one another.

  • Bloom, N., Sadun, R. and Reenen, J. van (2012) “The Organization of Firms Across Countries,” Quarterly Journal of Economics, 127(4), pp. 1663–1705.
    • Abstract

      We argue that social capital as proxied by trust increases aggregate productivity by affecting the organization of firms. To do this we collect new data on the decentralization of investment, hiring, production, and sales decisions from corporate headquarters to local plant managers in almost 4,000 firms in the United States, Europe, and Asia. We find that firms headquartered in high-trust regions are significantly more likely to decentralize. To help identify causal effects, we look within multinational firms and show that higher levels of bilateral trust between the multinational’s country of origin and subsidiary’s country of location increases decentralization, even after instrumenting trust using religious similarities between the countries. Finally, we show evidence suggesting that trust raises aggregate productivity by facilitating reallocation between firms and allowing more efficient firms to grow, as CEOs can decentralize more decisions.

  • Bruhn, M. and Gallego, F. A. (2012) “Good, Bad, and Ugly Colonial Activities: Do they matter for Economic Development?,” Review of Economics and Statistics, 94(2), pp. 433–461.
    • Abstract

      Levels of development vary widely within countries in the Amer- icas. We argue that part of this variation has its roots in the colonial era, when colonizers engaged in different economic activities in different regions of a country. We present evidence consistent with the view that “bad” activities (those that depended heavily on labor exploitation) led to lower economic development today than “good” activities (those that did not rely on labor exploitation). Our results also suggest that differences in political repre- sentation (but not in income inequality or human capital) could be the intermediating factor between colonial activities and current development.

  • Chanda, A., Cook, C. J. and Putterman, L. (2014) “Persistence of Fortune: Accounting for Population Movements, There Was No Post-Columbian Reversal,” American Economic Journal: Macroeconomics, 6(3), pp. 1–28. Available at: Link.
    • Abstract

      Using data on place of origin of today’s country populations and the indicators of level of development in 1500 used by Acemoglu, Johnson, and Robinson (2002), we confirm a reversal of fortune for colonized countries as territories, but find persistence of fortune for people and their descendants. Persistence results are at least as strong for three alternative measures of early development, for which reversal for territories, however, fails to hold. Additional exercises lend support to Glaeser et al.’s (2004) view that human capital is a more fundamental channel of influence of precolonial conditions on modern development than is quality of institutions.

  • De Long, J. B. and Shleifer, A. (1993) “Princes and Merchants: European City Growth before the Industrial Revolution,” Journal of Law and Economics, 36(2), pp. 671–702. Available at: Link.
  • Croix, D. De la and Doepke, M. (2009) “To segregate or to integrate: Education politics and democracy,” Review of Economic Studies. Wiley Online Library, 76(2), pp. 597–628.
    • Abstract

      How is the quality of public education affected by the presence of private schools for the rich? Theory and evidence suggest that the link depends crucially on the political system. We develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures. We find that the presence of a large private education sector benefits public schools in a broad-based democracy where politicians are responsive to low-income families but crowds out public education spending in a society that is politically dominated by the rich. The main predictions of the theory are consistent with state-level data and micro data from the U.S. as well as cross-country evidence from the Programme for International Student Assessment study.

  • Dell, M. (2010) “The Persistent Effect of Peru’s Mining Mita,” Econometrica, 78(6), pp. 1863–1903.
    • Abstract

      This study utilizes regression discontinuity to examine the long-run impacts of the mita, an extensive forced mining labor system in effect in Peru and Bolivia between 1573 and 1812. Results indicate that a mita effect lowers household consumption by around 25% and increases the prevalence of stunted growth in children by around six percentage points in subjected districts today. Using data from the Spanish Empire and Peruvian Republic to trace channels of institutional persistence, I show that the mita’s influence has persisted through its impacts on land tenure and public goods provision. Mita districts historically had fewer large landowners and lower educational attainment. Today, they are less integrated into road networks, and their residents are substantially more likely to be subsistence farmers.

  • Easterly, W. (2007) “Inequality Does Cause Underdevelopment: Insights from a New Instrument,” Journal of Development Economics, 84(2), pp. 755–776.
    • Abstract

      Consistent with the provocative hypothesis of Engerman and Sokoloff [Engermann, Stanley and Kenneth Sokoloff (1997), “Factor Endowments, Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States,” in Stephen Haber, ed. How Latin America Fell Behind, Stanford CA: Stanford University Press., Sokoloff, Kenneth L. and Stanley L. Engerman (2000), Institutions, Factor Endowments, and Paths of Development in the New World, Journal of Economic Perspectives v14, n3, 217–32.], this paper confirms with cross-country data that agricultural endowments predict inequality and inequality predicts development. The use of agricultural endowments –specifically the abundance of land suitable for growing wheat relative to that suitable for growing sugarcane – as an instrument for inequality is this paper’s approach to problems of measurement and endogeneity of inequality. The paper finds inequality also affects other development outcomes – institutions and schooling –which the literature has emphasized as mechanisms by which higher inequality lowers per capita income. It tests the inequality hypothesis for development, institutional quality and schooling against other recent hypotheses in the literature. While finding some evidence consistent with other development fundamentals, the paper finds high inequality to independently be a large and statistically significant barrier to prosperity, good quality institutions, and high schooling.

  • Easterly, W. and Levine, R. (2003) “Tropics, Germs, and Crops: How Endowments Influence Economic Development,” Journal of Monetary Economics, 50(1), pp. 3–39.
    • Abstract

      Does economic development depend on geographic endowments like temperate instead of tropical location, the ecological conditions shaping diseases, or an environment good for grains or certain cash crops? Or do these endowments of tropics, germs, and crops affect economic development only through institutions or policies? We test the endowment, institution, and policy views against each other using cross country evidence. We find evidence that tropics, germs, and crops affect development through institutions. We find no evidence that tropics, germs, and crops affect country incomes directly other than through institutions, nor do we find any effect of policies on development once we control for institutions.

  • Fenske, J. (2014) “Ecology, Trade, And States In Pre-Colonial Africa,” Journal of the European Economic Association, 12(3), pp. 612–640. Available at: Link.
    • Abstract

      State capacity matters for growth. I test Bates’ explanation of pre-colonial African states. He argues that trade across ecological boundaries promoted states. I find that African societies in ecologically diverse environments had more centralized states. This is robust to reverse causation, omitted heterogeneity, and alternative interpretations of the link between diversity and states. The result survives including non-African societies. I test mechanisms connecting trade to states, and find that trade supported class stratification between rulers and ruled. I underscore the importance of ethnic institutions and inform our knowledge of the effects of trade on institutions.

  • Fenske, J. (2013) “Does Land Abundance Explain African Institutions?,” Economic Journal, 123(12), pp. 1363–1390. Available at: Link.
    • Abstract

      I show how abundant land and scarce labor shaped African institutions before colonial rule. I present a model in which exogenous suitability of the land for agriculture and endogenously evolving population determine the existence of land rights, slavery, and polygyny. I then use cross-sectional data on pre-colonial African societies to demonstrate that, consistent with the model, the existence of land rights, slavery, and polygyny occurred in those parts of Africa that were the most suitable for agriculture, and in which population density was greatest. Next, I use the model to explain institutions among the Egba of southwestern Nigeria from 1830 to 1914. While many Egba institutions were typical of a land-abundant environment, they sold land and had disputes over it. These exceptions were the result of a period of land scarcity when the Egba first arrived at Abeokuta and of heterogeneity in the quality of land.

      (This abstract was borrowed from another version of this item.)

    • Feyrer, J. and Sacerdote, B. (2009) “Colonialism and Modern Income: Islands as Natural Experiments,” The Review of Economics and Statistics. The MIT Press, 91(2), pp. pp. 245–262. Available at: Link.
      • Abstract

        Using a new database of islands throughout the Atlantic, Pacific, and Indian Oceans we find a robust positive relationship between the number of years spent as a European colony and current GDP per capita. We argue that the nature of discovery and colonization of islands provides random variation in the length and type of colonial experience. We instrument for length of colonization using variation in prevailing wind patterns. We argue that wind speed and direction had a significant effect on historical colonial rule but do not have a direct effect on GDP today. The data also suggest that years as a colony after 1700 are more beneficial than earlier years. We also find a discernable pecking order among the colonial powers, with years under U.S., British, French, and Dutch rule having more beneficial effects than Spanish or Portuguese rule. Our finding of a strong connection between modern income and years of colonization is conditional on being colonized at all since each of the islands in our data set spent some time under colonial rule.

    • Galor, O. and Moav, O. (2006) “Das human-kapital: A theory of the demise of the class structure,” The Review of Economic Studies. Oxford University Press, 73(1), p. 85.
      • Abstract

        This paper hypothesizes that the demise of the 19th century’s European class structure reflects a deliberate transformation of society orchestrated by the capitalists. Contrary to conventional wisdom, it argues that the demise of this class structure was an outcome of a cooperative, rather than divisive process. The research suggests that the transition from this class structure may be viewed as the outcome of an optimal reaction by the capitalists to the increasing importance of human capital in sustaining their profit rates. The paper argues that the process of capital accumulation gradually intensified the importance of skilled labor in the production process and generated an incentive for investment in human capital. Due to the complementarity between physical and human capital in production, the capitalists were among the prime beneficiaries of the accumulation of human capital by the masses. They therefore had the incentive to support public education that would sustain their profit rates and would improve their economic well-being, although it would ultimately undermine their dynasty’s position in the social ladder. The research suggests that Karl Marx’s highly influential prediction about the inevitable class struggle due to declining profit rates stemmed from an under appreciation of the role that human capital would play in the production process. The basic premise of this research, regarding the positive attitude of capitalists towards education reforms, is supported empirically by a newly constructed data set of the voting patterns on England’s education reform proposed in the Balfour Act of 1902.

    • Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (2004) “Do Institutions Cause Growth?,” Journal of Economic Growth. Springer Netherlands, 9(3), pp. 271–303. Available at: Link.
      • Abstract

        We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that (a) human capital is a more basic source of growth than are the institutions, (b) poor countries get out of poverty through good policies, often pursued by dictators, and (c) subsequently improve their political institutions.

    • Goldstein, M. and Udry, C. (2008) “The Profits of Power: Land Rights and Agricultural Investment in Ghana,” Journal of Political Economy, 116(6), pp. 981–1022. Available at: Link.
      • Abstract

        We examine the impact of ambiguous and contested land rights on investment and productivity in agriculture in Akwapim, Ghana. We show that individuals who hold powerful positions in a local political hierarchy have more secure tenure rights and that as a consequence they invest more in land fertility and have substantially higher output. The intensity of investments on different plots cultivated by a given individual corresponds to that individual’s security of tenure over those specific plots and, in turn, to the individual’s position in the political hierarchy relevant to those specific plots. (c) 2008 by The University of Chicago. All rights reserved..

    • Guiso, L., Sapienza, P. and Zingales, L. (2009) “Cultural Biases in Economic Exchange?,” The Quarterly Journal of Economics. Oxford University Press, 124(3), pp. pp. 1095–1131. Available at: Link.
      • Abstract

        How much do cultural biases affect economic exchange? We answer this question by using data on bilateral trust between European countries. We document that this trust is affected not only by the characteristics of the country being trusted, but also by cultural aspects of the match between trusting country and trusted country, such as their history of conflicts and their religious, genetic, and somatic similarities. We then find that lower bilateral trust leads to less trade between two countries, less portfolio investment, and less direct investment, even after controlling for the characteristics of the two countries. This effect is stronger for goods that are more trust intensive. Our results suggest that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.

    • Guiso, L., Sapienza, P. and Zingales, L. (2006) “Does Culture Affect Economic Outcomes?,” Journal of Economic Perspectives, 20(2), pp. 23–48. Available at: Link.
      • Abstract

        Until recently, economists have been reluctant to rely on culture as a possible determinant of economic phenomena. Much of this reluctance stems from the very notion of culture: it is so broad and the channels through which it can enter the economic discourse so ubiquitous (and vague) that it is difficult to design testable, refutable hypotheses. In recent years, however, better techniques and more data have made it possible to identify systematic differences in people’s preferences and beliefs and to relate them to various measures of cultural legacy. These developments suggest an approach to introducing culturally-based explanations into economics that can be tested and may substantially enrich our understanding of economic phenomena. This paper summarizes this approach and its achievements so far, and outlines directions for future research.

    • Guiso, L., Sapienza, P. and Zingales, L. (2004) “The Role of Social Capital in Financial Development,” The American Economic Review. American Economic Association, 94(3), pp. pp. 526–556. Available at: Link.
      • Abstract

        To identify the effect of social capital on financial development, we exploit social capital differences within Italy. In high-social-capital areas, households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital of the province where they were born.

    • Guiso, L., Sapienza, P. and Zingales, L. (2004) “Does Local Financial Development Matter?,” The Quarterly Journal of Economics. Oxford University Press, 119(3), pp. pp. 929–969. Available at: Link.
      • Abstract

        We study the effects of differences in local financial development within an integrated financial market. We construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator, we find that financial development enhances the probability an individual starts his own business, favors entry of new firms, increases competition, and promotes growth. As predicted by theory, these effects are weaker for larger firms, which can more easily raise funds outside of the local area. These effects are present even when we instrument our indicator with the structure of the local banking markets in 1936, which, because of regulatory reasons, affected the supply of credit in the following 50 years. Overall, the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements.

    • Hornbeck, R. (2010) “Barbed Wire: Property Rights and Agricultural Development,” The Quarterly Journal of Economics, 125(2), pp. 767–810. Available at: Link.
      • Abstract

        This paper examines the impact on agricultural development of the introduction of barbed wire fencing to the American Plains in the late nineteenth century. Without a fence, farmers risked uncompensated damage by others’ livestock. From 1880 to 1900, the introduction and near-universal adoption of barbed wire greatly reduced the cost of fences, relative to the predominant wooden fences, especially in counties with the least woodland. Over that period, counties with the least woodland experienced substantial relative increases in settlement, land improvement, land values, and the productivity and production share of crops most in need of protection. This increase in agricultural development appears partly to reflect farmers’ increased ability to protect their land from encroachment. States’ inability to protect this full bundle of property rights on the frontier, beyond providing formal land titles, might have otherwise restricted agricultural development. (c) 2010 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

    • Hoyland, B., Moene, K. and Willumsen, F. (2012) “The Tyranny of International Index Rankings,” Journal of Development Economics, 97, pp. 1–14.
      • Abstract

        International index rankings are popular, but perhaps too persuasive. They emphasize country differences where similarity is the dominant feature. Rankings based on Doing Business, the Human Development Index and Freedom House can be misleading, not because of wrong indicators, but because the estimation of the scores ignores inherent uncertainty. Re-estimated with a method that captures this uncertainty, it becomes clear that ranking every adjacent country is a rather courageous activity.

    • Iyer, L. (2010) “Direct versus Indirect Colonial Rule in India: Long-term Consequences,” The Review of Economics and Statistics. The MIT Press, 92(4), pp. pp. 693–713. Available at: Link.
      • Abstract

        This paper compares economic outcomes across areas in India that were under direct British colonial rule with areas that were under indirect colonial rule. Controlling for selective annexation using a specific policy rule, I find that areas that experienced direct rule have significantly lower levels of access to schools, health centers, and roads in the postcolonial period. I find evidence that the quality of governance in the colonial period has a significant and persistent effect on postcolonial outcomes.

    • Johnson, S., McMillan, J. and Woodruff, C. (2002) “Property Rights and Finance,” The American Economic Review. American Economic Association, 92(5), pp. pp. 1335–1356. Available at: Link.
      • Abstract

        Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available. Where property rights are relatively strong, firms reinvest their profits; where they are relatively weak, entrepreneurs do not want to invest from retained earnings.

    • Knack, S. and Keefer, P. (1995) “Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures,” Economics and Politics, 7(3), pp. 207–227.
      • Abstract

        The impact of property rights on economic growth is examined using indicators provided by country risk evaluators to potential foreign investors. Indicators include evaluations of contract enforceability and risk of expropriation. Using these variables, property rights are found to have a greater impact on investment and growth than has previously been found for proxies such as the Gastil indices of liberties, and frequencies of revolutions, coups and political assassinations. Rates of convergence to U.S.-level incomes increase notably when these property rights variables are included in growth regressions. These results are robust to the inclusion of measures of factor accumulation and of economic policy.

    • La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (2008) “The Economic Consequences of Legal Origins,” Journal of Economic Literature. American Economic Association, 46(2), pp. pp. 285–332. Available at: Link.
      • Abstract

        In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country’s laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.

    • La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. W. (1998) “Law and Finance,” Journal of Political Economy. The University of Chicago Press, 106(6), pp. pp. 1113–1155. Available at: Link.
      • Abstract

        This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common-law countries generally have the strongest, and French civil-law countries the weakest legal protections of investors, with German and Scandanavian civil-law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified share-holders are unlikely to be important in countries that fail to protect their rights.

    • Mauro, P. (1995) “Corruption and Growth,” The Quarterly Journal of Economics, 110(3), pp. 681–712.
      • Abstract

        This paper analyzes a newly assembled data set consisting of subjective indices of corruption, the amount of red tape, the efficiency of the judicial system, and various categories of political stability for a cross section of countries. Corruption is found to lower investment, thereby lowering economic growth. The results are robust to controlling for endogeneity by using an index of ethnolinguistic fractionalization as an instrument.

    • Michalopoulos, S. and Papaioannou, E. (2014) “National Institutions and Subnational Development in Africa,” Quarterly Journal of Economics, 129(1), pp. 151–213.
      • Abstract

        We investigate the role of national institutions on African regional development in a novel framework. We exploit the fact that the arbitrary political boundaries in the eve of African independence partitioned more than two hundred ethnic groups across different countries subjecting similar cultures, residing in homogeneous geographic areas, to different formal institutions. Using both a matching-type and a regression discontinuity approach we show that differences in countrywide institutional structures across the national border do not explain within-ethnicity differences in economic performance, as captured by satellite light density at night. Despite some evidence of heterogeneity, for the overwhelming majority of groups the relationship is economically and statistically insignificant. While our results do not necessarily generalize to areas far from the national borders, close to the capital cities or to other parts of the world, they suggest that the cross-country positive correlation between formal national institutions and economic development has to be carefully interpreted.

    • Michalopoulos, S. and Papaioannou, E. (2013) “Pre-colonial Ethnic Institutions and Contemporary African Development,” Econometrica, 81(1), pp. 113–152.
      • Abstract

        We investigate the role of deeply-rooted pre-colonial ethnic institutions in shaping com- parative regional development within African countries. We combine information on the spatial distribution of ethnicities before colonization with regional variation in contempo- rary economic performance, as proxied by satellite images of light density at night. We document a strong association between pre-colonial ethnic political centralization and re- gional development. This pattern is not driven by differences in local geographic features or by other observable ethnic-specific cultural and economic variables. The strong positive association between pre-colonial political complexity and contemporary development ob- tains also within pairs of adjacent ethnic homelands with different legacies of pre-colonial political institutions.

    • Naritomi, J., Soares, R. and Assuncao, J. J. (2012) “Institutional Development and Colonial Heritage within Brazil,” Journal of Economic History, 72(2), pp. 393–422.
      • Abstract

        This article analyzes the determinants of local institutions in Brazil. We show that institutional quality and distribution of land are partly inherited from the colonial histories experienced by different areas of the country. The sugar cane boom—characterized by an oligarchic society—is associated with more land inequality. The gold boom—characterized by a heavily inefficient presence of the Portuguese state—is associated with worse governance and access to justice. We do not find similar effects for a postcolonial boom (coffee). We also find that the colonial episodes are correlated with lower provision of public goods.

    • Nunn, N. (2009) “The Importance of History for Economic Development,” Annual Review of Economics, 1, pp. 65–92.
      • Abstract

        This article provides a survey of a growing body of empirical evidence that points toward the important long-term effects that historic events can have on economic development. The most re- cent studies, using microlevel data and more sophisticated identifi- cation techniques, have moved beyond testing whether history matters and attempt to identify exactly why history matters. The most commonly examined channels include institutions, culture, knowledge and technology, and movements between multiple equi- libria. The article concludes with a discussion of the questions that remain and the direction of current research in the literature.

    • Nunn, N. (2008) “The Long-Term Effects of Africa’s Slave Trades,” The Quarterly Journal of Economics. Oxford University Press, 123(1), pp. 139–176. Available at: Link.
      • Abstract

        Can part of Africa’s current underdevelopment be explained by its slave trades? To explore this question, I use data from shipping records and historical documents reporting slave ethnicities to construct estimates of the number of slaves exported from each country during Africa’s slave trades. I find a robust negative relationship between the number of slaves exported from a country and current economic performance. To better understand if the relationship is causal, I examine the historical evidence on selection into the slave trades and use instrumental variables. Together the evidence suggests that the slave trades had an adverse effect on economic development.

    • Nunn, N. and Puga, D. (2012) “Ruggedness: The Blessing of Bad Geography in Africa,” The Review of Economics and Statistics. The MIT Press, 94(1), pp. pp. 20–36. Available at: Link.
      • Abstract

        We show that geography, through its impact on history, can have important effects on economic development today. The analysis focuses on the historic interaction between ruggedness and Africa’s slave trades. Although rugged terrain hinders trade and most productive activities, negatively affecting income globally, rugged terrain within Africa afforded protection to those being raided during the slave trades. Since the slave trades retarded subsequent economic development, ruggedness within Africa has also had a historic indirect positive effect on income. Studying all countries worldwide, we estimate the differential effect of ruggedness on income for Africa. We show that the differential effect of ruggedness is statistically significant and economically meaningful, it is found in Africa only, it cannot be explained by other factors like Africa’s unique geographic environment, and it is fully accounted for by the history of the slave trades.

    • Nunn, N. and Wantchekon, L. (2011) “The Slave Trade and the Origins of Mistrust in Africa,” American Economic Review, 101(7), pp. 3221–52.
      • Abstract

        We show that current differences in trust levels within Africa can be traced back to the transatlantic and Indian Ocean slave trades. Combining contemporary individual-level survey data with historical data on slave shipments by ethnic group, we find that individuals whose ancestors were heavily raided during the slave trade are less trusting today. Evidence from a variety of identification strategies suggests that the relationship is causal. Examining causal mechanisms, we show that most of the impact of the slave trade is through factors that are internal to the individual, such as cultural norms, beliefs, and values.

    • Olson, M. (1996) “Distinguished Lecture on Economics in Government: Big Bills Left on the Sidewalk: Why Some Nations are Rich, and Others Poor,” The Journal of Economic Perspectives. American Economic Association, 10(2), pp. 3–24. Available at: Link.
      • Abstract

        Some research presumes that, when rational parties bargain, nothing is left on the table, so that social outcomes are efficient and leave countries on the frontiers of their aggregate production functions. A study of differences in per capita incomes across countries shows that this cannot be the case. Countries’ endowments of natural and human resources do not explain any significant part of the variation in incomes and the mobility of capital assures that it is impartially available to all countries. National differences in the quality of policies and institutions across countries mainly account for differences in per capita incomes.

    • Ramcharan, R. (2010) “Inequality and Redistribution: Evidence from US Counties and States, 1890-1930,” The Review of Economics and Statistics. MIT Press, 92(4), pp. 729–744.
      • Abstract

        Does economic inequality affect redistributive policy? This paper turns to U.S. county data on land inequality over the period 1890 to 1930 to help address this fundamental question in political economy. Redistributive policy was primarily decided at the local level during this period, making county-level data particularly informative. Examining within-state variation also reduces the potential impact of latent institutional and political variables. The paper also uses a variety of identification strategies, including historic variables as well as county weather and crop characteristics, as instruments for land inequality. The evidence consistently suggests that greater inequality is significantly associated with less redistribution. This negative relationship is especially large in heavily rural counties, where concentrated landownership implied that landed elites also controlled the majority of economic production.

    • Robinson, J. A., Torvik, R. and Verdier, T. (2006) “Political Foundations of the Resource Curse,” Journal of Development Economics, 79(2), pp. 447–468. Available at: Link.
      • Abstract

        I modify the uniform-price auction rules in allowing the seller to ration bidders. This allows me to provide a strategic foundation for underpricing when the seller has an interest in ownership dispersion. Moreover, many of the so-called "collusive-seeming" equilibria disappear.

    • Rodrik, D., Subramanian, A. and Trebbi, F. (2004) “Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development,” Journal of Economic Growth. Springer Netherlands, 9(2), pp. 131–165. Available at: Link.
      • Abstract

        We estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instrumental variables for institutions and trade. Our results indicate that the quality of institutions “trumps” everything else. Once institutions are controlled for, conventional measures of geography have at best weak direct effects on incomes, although they have a strong indirect effect by influencing the quality of institutions. Similarly, once institutions are controlled for, trade is almost always insignificant, and often enters the income equation with the “wrong” (i.e., negative) sign. We relate our results to recent literature, and where differences exist, trace their origins to choices on samples, specification, and instrumentation.

    • Sokoloff, K. L. and Engerman, S. L. (2000) “History Lessons: Institutions, Factors Endowments, and Paths of Development in the New World,” The Journal of Economic Perspectives. American Economic Association, 14(3), pp. 217–232. Available at: Link.
      • Abstract

        The explanations offered for the contrasting records of long-run growth and development among the societies of North and South America most often focus on institutions. The traditional explanations for the sources of these differences in institutions, typically highlight the significance of national heritage or religion. We, in contrast, argue that a hemispheric perspective across the wide range of colonies established in the New World by the Europeans suggests that although there were many influences, factor endowments or initial conditions had profound and enduring effects on the long-run paths of institutional and economic development followed by the respective economies.

    • Vollrath, D. (2013) “Inequality and school funding in the rural United States, 1890,” Explorations in Economic History, 50(2), pp. 267–284. Available at: Link.   Paper   Data
      • Abstract

        This paper examines the relationship of inequality to school funding in counties of the U.S. in 1890. Inequality, measured here on the basis of farm-size distributions, is found to be negatively related to local school property tax revenues across the whole sample of 1345 rural counties. However, further analysis shows that this relationship is not consistent across the sample. In the North, there is a significant negative relationship between inequality and school funding, and this relationship is shown to be consistent with the fact that assessed values of property did not rise linearly with wealth. Across the South, there is no distinct relationship between inequality and school funding. The results also indicate that inequality in the South cannot directly explain the gap in school funding with the North, in the sense that redistributing farms in the South to match the Northern distributions leads to no predicted increase in school funding.