《国际政治经济学》文献资料（Use of History and Sociology in International Political Economy）The Colonial Origins of Comparative Development

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The Colonial Origins of Comparative Development: An Empirical Investigation By DARON ACEMOGLU,SIMON JOHNSON,AND JAMES A.ROBINSON* We exploit differences in European mortaliry rates to estimate the effect of institu- tions 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.(JEL O11,P16,P51) What are the fundamental causes of the tionary policies will invest more in physical large differences in income per capita across and human capital,and will use these factors countries?Although there is still little con- more efficiently to achieve a greater level of sensus on the answer to this question,differ- income (e.g.,Douglass C.North and Robert ences in institutions and property rights have P.Thomas,1973;Eric L.Jones,1981;North, received considerable attention in recent 1981).This view receives some support from years.Countries with better "institutions," cross-country correlations between measures more secure property rights,and less distor- of property rights and economic development (e.g.,Stephen Knack and Philip Keefer,1995; Paulo Mauro,1995;Robert E.Hall and Acemoglu:Department of Economics,E52-380b Charles I.Jones,1999;Dani Rodrik,1999), Massachusetts Institute of Technology,Cambridge,MA and from a few micro studies that investigate 02319,and Canadian Institute for Advanced Research (e-mail:daron@mit.edu);Johnson:Sloan School of Man- the relationship between property rights and agement,Massachusetts Institute of Technology,Cam- investment or output (e.g.,Timothy Besley, bridge,MA 02319 (e-mail:sjohnson@mit.edu);Robinson: 1995;Christopher Mazingo,1999;Johnson et Department of Political Science and Department of Eco- al,1999). nomics,210 Barrows Hall,University of California,Berke- At some level it is obvious that institutions ley,CA 94720(e-mail:jamesar@socrates.berkeley.edu). We thank Joshua Angrist,Abhijit Banerjee,Esther Duflo, matter.Witness,for example,the divergent Stan Engerman,John Gallup,Claudia Goldin,Robert paths of North and South Korea,or East and Hall,Chad Jones,Larry Katz,Richard Locke,Andrei West Germany,where one part of the country Shleifer,Ken Sokoloff,Judith Tendler,three anonymous stagnated under central planning and collec- referees,and seminar participants at the University of tive ownership,while the other prospered California-Berkeley,Brown University,Canadian Insti- tute for Advanced Research,Columbia University,Har- with private property and a market economy vard University,Massachusetts Institute of Technology, Nevertheless,we lack reliable estimates of National Bureau of Economic Research,Northwestern the effect of institutions on economic perfor- University,New York University,Princeton University, mance.It is quite likely that rich economies University of Rochester,Stanford University,Toulouse University,University of California-Los Angeles,and the choose or can afford better institutions.Per- World Bank for useful comments.We also thank Robert haps more important,economies that are dif- McCaa for guiding us to the data on bishops'mortality. ferent for a variety of reasons will differ both 1369

The Colonial Origins of Comparative Development: An Empirical Investigation By DARONACEMOGLU, SIMON JOHNSON, AND JAMES A. ROBINSON* We exploit differences in European mortality rates to estimate the effect of institutions on economic pe@ormance. Europeans adopted very dzrerent 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. (JEL 011, P16, P51) What are the fundamental causes of the large differences in income per capita across countries? Although there is still little consensus on the answer to this question, differences in institutions and property rights have received considerable attention in recent years. Countries with better "institutions," more secure property rights, and less distor- * Acemoglu: Department of Economics, E52-380b, Massachusetts Institute of Technology, Cambridge, MA 02319, and Canadian Institute for Advanced Research (e-mail: daron@mit.edu); Johnson: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, MA 02319 (e-mail: sjohnson@mit.edu); Robinson: Department of Political Science and Department of Economics, 210 Barrows Hall, University of California, Berkeley, CA 94720 (e-mail: jamesar@socrates.berkeley.edu). We thank Joshua Angrist, Abhijit Banerjee, Esther Duflo, Stan Engerman, John Gallup, Claudia Goldin, Robert Hall, Chad Jones, Larry Katz, Richard Locke, Andrei Shleifer, Ken Sokoloff, Judith Tendler, three anonymous referees, and seminar participants at the University of California-Berkeley, Brown University, Canadian Institute for Advanced Research, Columbia University, Harvard University, Massachusetts Institute of Technology, National Bureau of Economic Research, Northwestern University, New York University, Princeton University, University of Rochester, Stanford University, Toulouse University, University of California-Los Angeles, and the World Bank for useful comments. We also thank Robert McCaa for guiding us to the data on bishops' mortality. tionary policies will invest more in physical and human capital, and will use these factors more efficiently to achieve a greater level of income (e.g., Douglass C. North and Robert P. Thomas, 1973; Eric L. Jones, 1981; North, 1981). This view receives some support from cross-country correlations between measures of property rights and economic development (e.g., Stephen Knack and Philip Keefer, 1995; Paulo Mauro, 1995; Robert E. Hall and Charles I. Jones, 1999; Dani Rodrik, 1999), and from a few micro studies that investigate the relationship between property rights and investment or output (e.g., Timothy Besley, 1995; Christopher Mazingo, 1999; Johnson et al., 1999). At some level it is obvious that institutions matter. Witness, for example, the divergent paths of North and South Korea, or East and West Germany, where one part of the country stagnated under central planning and collective ownership, while the other prospered with private property and a market economy. Nevertheless, we lack reliable estimates of the effect of institutions on economic performance. It is quite likely that rich economies choose or can afford better institutions. Perhaps more important, economies that are different for a variety of reasons will differ both

1370 THE AMERICAN ECONOMIC REVIEW DECEMBER 200 in their institutions and in their income per current institutions in these countries.2 More capita. specifically,our theory can be schematically To estimate the impact of institutions on eco- summarized as nomic performance,we need a source of exog- enous variation in institutions.In this paper,we (potential)settler propose a theory of institutional differences mortality →settlements among countries colonized by Europeans,'and exploit this theory to derive a possible source of exogenous variation.Our theory rests on three early current → institutions 出 institutions premises: 1.There were different types of colonization current → policies which created different sets of insti- performance. tutions.At one extreme,European powers set up "extractive states,"exemplified by the Bel- We use data on the mortality rates of soldiers, gian colonization of the Congo.These institu- bishops,and sailors stationed in the colonies be- tions did not introduce much protection for tween the seventeenth and nineteenth centuries. private property,nor did they provide checks largely based on the work of the historian Philip and balances against government expropria- D.Curtin.These give a good indication of the tion.In fact,the main purpose of the extractive mortality rates faced by settlers.Europeans were state was to transfer as much of the resources well informed about these mortality rates at the of the colony to the colonizer. time,even though they did not know how to At the other extreme,many Europeans mi- control the diseases that caused these high mor- grated and settled in a number of colonies, tality rates. creating what the historian Alfred Crosby Figure 1 plots the logarithm of GDP per (1986)calls"Neo-Europes."The settlers tried capita today against the logarithm of the settler to replicate European institutions,with strong mortality rates per thousand for a sample of 75 emphasis on private property and checks countries (see below for data details).It shows a against government power.Primary examples strong negative relationship.Colonies where of this include Australia,New Zealand,Can- Europeans faced higher mortality rates are to- ada,and the United States. day substantially poorer than colonies that were 2.The colonization strategy was influenced by healthy for Europeans.Our theory is that this the feasibility of settlements.In places where relationship reflects the effect of settler mortal- the disease environment was not favorable to ity working through the institutions brought by European settlement,the cards were stacked Europeans.To substantiate this,we regress cur- against the creation of Neo-Europes,and the rent performance on current institutions,and formation of the extractive state was more instrument the latter by settler mortality rates. likely. Since our focus is on property rights and checks 3.The colonial state and institutions persisted against government power,we use the protec- even after independence. tion against"risk of expropriation"index from Political Risk Services as a proxy for institu- Based on these three premises,we use the tions.This variable measures differences in in- mortality rates expected by the first European stitutions originating from different types of settlers in the colonies as an instrument for states and state policies.3 There is a strong By "colonial experience"we do not only mean the 2 Note that although only some countries were colonized, direct control of the colonies by European powers,but more there is no selection bias here.This is because the question generally,European influence on the rest of the world.So we are interested in is the effect of colonization policy according to this definition,Sub-Saharan Africa was conditional on being colonized. strongly affected by "colonialism"between the sixteenth 3 Government expropriation is not the only institutional and nineteenth centuries because of the Atlantic slave trade. feature that matters.Our view is that there is a "cluster of

1370 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 in their institutions and in their income per capita. To estimate the impact of institutions on economic performance, we need a source of exogenous variation in institutions. In this paper, we propose a theory of institutional differences among countries colonized by ~uro~eans, ' and exploit this theory to derive a possible source of exogenous variation. Our theory rests on three premises: 1. There were different types of colonization policies which created different sets of institutions. At one extreme, European powers set up "extractive states," exemplified by the Belgian colonization of the Congo. These institutions did not introduce much protection for private property, nor did they provide checks and balances against government expropriation. In fact, the main purpose of the extractive state was to transfer as much of the resources of the colony to the colonizer. At the other extreme, many Europeans migrated and settled in a number of colonies, creating what the historian Alfred Crosby (1986) calls "Neo-Europes." The settlers tried to replicate European institutions, with strong emphasis on private property and checks against government power. Primary examples of this include Australia, New Zealand, Canada, and the United States. 2. The colonization strategy was influenced by the feasibility of settlements. In places where the disease environment was not favorable to European settlement, the cards were stacked against the creation of Neo-Europes, and the formation of the extractive state was more likely. 3. The colonial state and institutions persisted even after independence. Based on these three premises, we use the mortality rates expected by the first European settlers in the colonies as an instrument for ' By "colonial experience" we do not only mean the direct control of the colonies by European powers, but more generally, European influence on the rest of the world. So according to this definition, Sub-Saharan Africa was strongly affected by "colonialism" between the sixteenth and nineteenth centuries because of the Atlantic slave trade. current institutions in these countrie~.~ More specifically, our theory can be schematically summarized as (potential) settler 3 settlements mortality early current institutions institutions current 3 performance. We use data on the mortality rates of soldiers, bishops, and sailors stationed in the colonies between the seventeenth and nineteenth centuries, largely based on the work of the historian Philip D. Curtin. These give a good indication of the mortality rates faced by settlers. Europeans were well informed about these mortality rates at the time, even though they did not know how to control the diseases that caused these high mortality rates. Figure 1 plots the logarithm of GDP per capita today against the logarithm of the settler mortality rates per thousand for a sample of 75 countries (see below for data details). It shows a strong negative relationship. Colonies where Europeans faced higher mortality rates are today substantially poorer than colonies that were healthy for Europeans. Our theory is that this relationship reflects the effect of settler mortality working through the institutions brought by Europeans. To substantiate this, we regress current performance on current institutions, and instrument the latter by settler mortality rates. Since our focus is on property rights and checks against government power, we use the protection against "risk of expropriation" index from Political Risk Services as a proxy for institutions. This variable measures differences in institutions originating from different types of states and state policies.3 There is a strong 'Note that although only some countries were colonized, there is no selection bias here. This is because the question we are interested in is the effect of colonization policy conditional on being colonized. Government expropriation is not the only institutional feature that matters. Our view is that there is a "cluster of

VOL.91 NO.5 ACEMOGLU ET AL:THE COLONIAL ORIGINS OF DEVELOPMENT 1371 10 MLT CHH MUS ZAFYS PAN GAB 墨 O FJI IDN ddd GUY LKWD AGO PAKIND SDN GN卷 GMB BGD NGA QA MLI Jed TZA SLE ETH 8 6 8 Log of Settler Mortality FIGURE 1.REDUCED-FORM RELATIONSHIP BETWEEN INCOME AND SETTLER MORTALITY (first-stage)relationship between settler mortal- institutions to the level of Chile could,in the ity rates and current institutions,which is inter- long run,lead to as much as a 7-fold increase in esting in its own right.The regression shows Nigeria's income (in practice Chile is over 11 that mortality rates faced by the settlers more times as rich as Nigeria). than 100 years ago explains over 25 percent The exclusion restriction implied by our in- of the variation in current institutions.We also strumental variable regression is that,condi- document that this relationship works through tional on the controls included in the regression, the channels we hypothesize:(potential)settler the mortality rates of European settlers more mortality rates were a major determinant of than 100 years ago have no effect on GDP per settlements;settlements were a major determi- capita today,other than their effect through nant of early institutions (in practice,institu- institutional development.The major concern tions in 1900);and there is a strong correlation with this exclusion restriction is that the mor- between early institutions and institutions to- tality rates of settlers could be correlated with day.Our two-stage least-squares estimate of the the current disease environment,which may effect of institutions on performance is rela- have a direct effect on economic performance. tively precisely estimated and large.For ex- In this case,our instrumental-variables esti- ample,it implies that improving Nigeria's mates may be assigning the effect of diseases on income to institutions.We believe that this is unlikely to be the case and that our exclusion restriction is plausible.The great majority of institutions,"including constraints on government expropri European deaths in the colonies were caused by ation,independent judiciary,property rights enforcement, malaria and yellow fever.Although these dis- and institutions providing equal access to education and ensuring civil liberties,that are important to encourage eases were fatal to Europeans who had no im- investment and growth.Expropriation risk is related to all munity,they had limited effect on indigenous these institutional features.In Acemoglu et al.(2000),we adults who had developed various types of im- reported similar results with other institutions variables. munities.These diseases are therefore unlikely 4 Differences in mortality rates are not the only,or even the main,cause of variation in institutions.For our empir- to be the reason why many countries in Africa ical approach to work,all we need is that they are a source and Asia are very poor today (see the discussion of exogenous variation. in Section III,subsection A).This notion is

VOL. 91 NO. 5 ACEMOGLU ET AL.: THE COLONIAL ORIGINS OF DEVELOPMEN7 ETH 4 6 Log of Settler Mortality FIGURE1. REDUCED-FORM RELATIONSHIP BETWEEN INCOME AND SETTLER MORTALITY (first-stage) relationship between settler mortality rates and current institutions, which is interesting in its own right. The regression shows that mortality rates faced by the settlers more than 100 years ago explains over 25 percent of the variation in current institution^.^ We also document that this relationship works through the channels we hypothesize: (potential) settler mortality rates were a major determinant of settlements; settlements were a major determinant of early institutions (in practice, institutions in 1900); and there is a strong correlation between early institutions and institutions today. Our two-stage least-squares estimate of the effect of institutions on performance is relatively precisely estimated and large. For example, it implies that improving Nigeria's institutions," including constraints on government expropriation, independent judiciary, property rights enforcement, and institutions providing equal access to education and ensuring civil liberties, that are important to encourage investment and growth. Expropriation risk is related to all these institutional features. In Acemoglu et al. (2000),we reported similar results with other institutions variables. Differences in mortality rates are not the only, or even the main, cause of variation in institutions. For our empirical approach to work, all we need is that they are a source of exogenous variation. institutions to the level of Chile could, in the long run, lead to as much as a 7-fold increase in Nigeria's income (in practice Chile is over 11 times as rich as Nigeria). The exclusion restriction implied by our instrumental variable regression is that, conditional on the controls included in the regression, the mortality rates of European settlers more than 100 years ago have no effect on GDP per capita today, other than their effect through institutional development. The major concern with this exclusion restriction is that the mortality rates of settlers could be correlated with the current disease environment, which may have a direct effect on economic performance. In this case, our instrumental-variables estimates may be assigning the effect of diseases on income to institutions. We believe that this is unlikelv to be the case and that our exclusion restriction is plausible. The great majority of European deaths in the colonies were caused by malaria and yellow fever. Although these diseases were fatal to Europeans who had no immunity, they had limited effect on indigenous adults who had developed various types of immunities. These diseases are therefore unlikely to be the reason why many countries in Africa and Asia are very poor today (see the discussion in Section 111, subsection A). This notion is

1372 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 supported by the mortality rates of local people mortality)and the current fraction of the popu- in these areas.For example,Curtin (1968 Table lation of European descent. 2)reports that the annual mortality rates of local Naturally,it is impossible to control for all troops serving with the British army in Bengal possible variables that might be correlated with and Madras were respectively 11 and 13 in settler mortality and economic outcomes.Fur- 1,000.These numbers are quite comparable to, thermore,our empirical approach might capture in fact lower than,the annual mortality rates of the effect of settler mortality on economic per- British troops serving in Britain,which were formance,but working through other channels. approximately 15 in 1,000.In contrast,the mor- We deal with these problems by using a simple tality rates of British troops serving in these overidentification test using measures of Euro- colonies were much higher because of their lack pean migration to the colonies and early insti- of immunity.For example,mortality rates in tutions as additional instruments.We then use Bengal and Madras for British troops were be- overidentification tests to detect whether settler tween 70 and 170 in 1,000.The view that the mortality has a direct effect on current perfor- disease burden for indigenous adults was not mance.The results are encouraging for our unusual in places like Africa or India is also approach;they generate no evidence for a direct supported by the relatively high population den- effect of settler mortality on economic sities in these places before Europeans arrived outcomes. (Colin McEvedy and Richard Jones,1975). We are not aware of others who have pointed We document that our estimates of the effect out the link between settler mortality and insti- of institutions on performance are not driven by tutions,though scholars such as William H. outliers.For example,excluding Australia,New McNeill (1976),Crosby (1986),and Jared M. Zealand,Canada,and the United States does not Diamond (1997)have discussed the influence of change the results,nor does excluding Africa. diseases on human history.Diamond (1997),in Interestingly,we show that once the effect of particular,emphasizes comparative develop- institutions on economic performance is con- ment,but his theory is based on the geograph- trolled for,neither distance from the equator nor ical determinants of the incidence of the the dummy for Africa is significant.These re- neolithic revolution.He ignores both the impor- sults suggest that Africa is poorer than the rest tance of institutions and the potential causes of of the world not because of pure geographic divergence in more recent development,which or cultural factors,but because of worse are the main focus of our paper.Work by Ro- institutions. nald E.Robinson and John Gallagher (1961), The validity of our approach-i.e.,our exclu- Lewis H.Gann and Peter Duignan (1962), sion restriction-is threatened if other factors Donald Denoon (1983),and Philip J.Cain and correlated with the estimates of settler mortality Anthony G.Hopkins (1993)emphasizes that affect income per capita.We adopt two strate- settler colonies such as the United States and gies to substantiate that our results are not New Zealand are different from other colonies, driven by omitted factors.First,we investigate and point out that these differences were impor- whether institutions have a comparable effect tant for their economic success.Nevertheless, on income once we control for a number of this literature does not develop the link between variables potentially correlated with settler mor- mortality,settlements,and institutions. tality and economic outcomes.We find that Our argument is most closely related to work none of these overturn our results;the estimates on the influence of colonial experience on insti- change remarkably little when we include con- tutions.Frederich A.von Hayek (1960)argued trols for the identity of the main colonizer,legal that the British common law tradition was su- origin,climate,religion,geography,natural re- perior to the French civil law,which was devel- sources,soil quality,and measures of ethnolin- oped during the Napoleonic era to restrain guistic fragmentation.Furthermore,the results judges'interference with state policies (see also are also robust to the inclusion of controls for Seymour M.Lipset,1994).More recently, the current disease environment (e.g.,the prev- Rafael La Porta et al.(1998,1999)emphasize alence of malaria,life expectancy,and infant the importance of colonial origin (the identity of

1372 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 supported by the mortality rates of local people in these areas. For example, Curtin (1968 Table 2) reports that the annual mortality rates of local troops serving with the British army in Bengal and Madras were respectively 11 and 13 in 1,000. These numbers are quite comparable to, in fact lower than, the annual mortality rates of British troops serving in Britain, which were approximately 15 in 1,000. In contrast, the mortality rates of British troops serving in these colonies were much higher because of their lack of immunity. For example, mortality rates in Bengal and Madras for British troops were between 70 and 170 in 1,000. The view that the disease burden for indigenous adults was not unusual in laces like kfrica or India is also supported b; the relatively high population densities in these places before Europeans arrived (Colin McEvedy and Richard Jones, 1975). We document that our estimates of the effect of institutions on performance are not driven by outliers. For example, excluding Australia, New Zealand, Canada, and the United States does not change the results, nor does excluding Africa. Interestingly, we show that once the effect of institutions on economic performance is controlled for, neither distance-from the equator nor the dummy for Africa is significant. These results suggest that Africa is poorer than the rest of the world not because of pure geographic or cultural factors. but because of worse institutions. The validity of our approach-i.e., our exclusion restriction-is threatened if other factors correlated with the estimates of settler mortalitv affect income per capita. We adopt two strategies to substantiate that our results are not driven by omitted factors. First, we investigate whether institutions have a comparable effect on income once we control for a number of variables potentially correlated with settler mortality and economic outcomes. We find that none of these overturn our results: the estimates change remarkably little when we include controls for the identity of the main colonizer, legal origin, climate, religion, geography, natural resources, soil quality, and measures of ethnolinguistic fragmentation. Furthermore, the results are also robust to the inclusion of controls for the current disease environment (e.g., the prevalence of malaria, life expectancy, and infant mortality) and the current fraction of the population of European descent. Naturally, it is impossible to control for all possible variables that might be correlated with settler mortality and economic outcomes. Furthermore, our empirical approach might capture the effect of settler mortality on economic performance, but working through other channels. We deal with these problems by using a simple overidentification test using measures of European migration to the colonies and early institutions as additional instruments. We then use overidentification tests to detect whether settler mortality has a direct effect on current performance. The results are encouraging for our approach; they generate no evidence for a direct effect of settler mortality on economic outcomes. We are not aware of others who have pointed out the link between settler mortality and institutions, though scholars such as William H. McNeill (1976), Crosby (1986), and Jared M. Diamond (1997) have discussed the influence of diseases on human history. Diamond (1997), in particular, emphasizes comparative development, but his theory is based on the geographical determinants of the incidence of the neolithic revolution. He ignores both the importance of institutions and the potential causes of divergence in more recent development, which are the main focus of our paper. Work by Ronald E. Robinson and John Gallagher (1961), Lewis H. Gann and Peter Duignan (1962), Donald Denoon (1983), and Philip J. Cain and Anthony G. Hopkins (1993) emphasizes that settler colonies such as the United States and New Zealand are different from other colonies, and point out that these differences were important for their economic success. Nevertheless, this literature does not develop the link between mortality, settlements, and institutions. Our argument is most closely related to work on the influence of colonial experience on institutions. Frederich A. von Hayek (1960) argued that the British common law tradition was superior to the French civil law, which was developed during the Napoleonic era to restrain judges' interference with state policies (see also Seymour M. Lipset, 1994). More recently, Rafael La Porta et al. (1998, 1999) emphasize the importance of colonial origin (the identity of

VOL 91 NO.5 ACEMOGLU ET AL:THE COLONIAL ORIGINS OF DEVELOPMENT 1373 the colonizer)and legal origin on current insti- direct effect on performance.For example,Wil- tutions,and show that the common-law coun- liiam Easterly and Ross Levine (1997)argue tries and former British colonies have better that ethnolinguistic fragmentation can affect property rights and more developed financial performance by creating political instability, markets.Similarly,David Landes (1998 Chap- while Charles de Montesquieu [1748](1989) ters 19 and 20)and North et al.(1998)argue and more recently David E.Bloom and Jeffrey that former British colonies prospered relative D.Sachs (1998)and John Gallup et al.(1998) to former French,Spanish,and Portuguese col- argue for a direct effect of climate on perfor- onies because of the good economic and polit- mance.If,indeed,these variables have a direct ical institutions and culture they inherited from effect,they are invalid instruments and do not Britain.In contrast to this approach which establish that it is institutions that matter.The focuses on the identity of the colonizer,we advantage of our approach is that conditional on emphasize the conditions in the colonies.Spe- the variables we already control for,settler mor- cifically,in our theory-and in the data-it is tality more than 100 years ago should have no not the identity of the colonizer or legal origin effect on output today,other than through its that matters,but whether European colonialists effect on institutions.Interestingly,our results could safely settle in a particular location: show that distance from the equator does not where they could not settle,they created worse have an independent effect on economic perfor- institutions.In this respect,our argument is mance,validating the use of this variable as an closely related to that of Stanley L.Engerman instrument in the work by Hall and Jones and Kenneth L.Sokoloff(1997)who also em- (1999). phasize institutions,but link them to factor en- The next section outlines our hypothesis and dowments and inequality. provides supporting historical evidence.Section Empirically,our work is related to a number II presents OLS regressions of GDP per capita of other attempts to uncover the link between on our index of institutions.Section III de- institutions and development,as well as to scribes our key instrument for institutions,the Graziella Bertocchi and Fabio Canova (1996) mortality rates faced by potential settlers at the and Robin M.Grier(1999),who investigate the time of colonization.Section IV presents our effect of being a colony on postwar growth. main results.Section V investigates the robust- Two papers deal with the endogeneity of in- ness of our results,and Section VI concludes. stitutions by using an instrumental variables approach as we do here.Mauro (1995)instru- I.The Hypothesis and Historical Background ments for corruption using ethnolinguistic frag- mentation.Hall and Jones (1999),in turn,use We hypothesize that settler mortality affected distance from the equator as an instrument for settlements;settlements affected early institu- social infrastructure because,they argue,lati- tions;and early institutions persisted and tude is correlated with“Western influence,” formed the basis of current institutions.In this which leads to good institutions.The theoretical section,we discuss and substantiate this hypoth- reasoning for these instruments is not entirely esis.The next subsection discusses the link be- convincing.It is not easy to argue that the tween mortality rates of settlers and settlement Belgian influence in the Congo,or Western decisions.then we discuss differences in colo- influence in the Gold Coast during the era of nization policies,and finally,we turn to the slavery promoted good institutions.Ethnolin- causes of institutional persistence. guistic fragmentation,on the other hand,seems endogenous,especially since such fragmenta- A.Mortality and Settlements tion almost completely disappeared in Europe during the era of growth when a centralized There is little doubt that mortality rates were state and market emerged (see,e.g.,Eugen a key determinant of European settlements. J.Weber,1976;Benedict Anderson,1983). Curtin (1964,1998)documents how both the Econometrically,the problem with both studies British and French press informed the public of is that their instruments can plausibly have a mortality rates in the colonies.Curtin (1964)

VOL. 91 NO. 5 ACEMOGLU ET AL.: THE COLONIAL ORIGINS OF DEVELOPMENT 1373 the colonizer) and legal origin on current institutions, and show that the common-law countries and former British colonies have better property rights and more developed financial markets. Similarly, David Landes (1998 Chapters 19 and 20) and North et al. (1998) argue that former British colonies prospered relative to former French, Spanish, and ~ortu~uese colonies because of the good economic and political institutions and culture they inherited from Britain. In contrast to this approach which focuses on the identitv of the colonizer, we emphasize the conditions in the colonies. Specifically, in our theory-and in the data-it is not the identity of the colonizer or legal origin that matters, but whether European colonialists could safely settle in a particular location: where they could not settle, they created worse institutions. In this respect, our argument is closely related to that of Stanley L. Engerman and Kenneth L. Sokoloff (1997) who also emphasize institutions, but link them to factor endowments and inequality. Empirically, our work is related to a number of other attempts to uncover the link between institutions and development, as well as to Graziella Bertocchi and Fabio Canova (1996) and Robin M. Grier (1999), who investigate the effect of being a colony on postwar growth. Two papers deal with the endogeneity of institutions by using an instrumental variables approach as we do here. Mauro (1995) instruments for cormption using ethnolinguistic fragmentation. Hall and Jones (1999), in turn, use distance from the equator as an instrument for social infrastructure because, they argue, latitude is correlated with "Western influence," which leads to good institutions. The theoretical " reasoning for these instruments is not entirely convincing. It is not easy to argue that the Belgian influence in the Congo, or Western influence in the Gold Coast during the era of slavery promoted good institutions. Ethnolinguistic fragmentation, on the other hand, seems endogenous, especially since such fragmentation almost completely disappeared in Europe during the era of growth when a centralized state and market emerged (see, e.g., Eugen J. Weber, 1976; Benedict Anderson, 1983). Econometrically, the problem with both studies is that their instruments can plausibly have a direct effect on performance. For example, Williiam Easterly and Ross Levine (1997) argue that ethnolinguistic fragmentation can affect performance by creating political instability, while Charles de Montesquieu [I7481 (1989) and more recently David E. Bloom and Jeffrey D. Sachs (1998) and John Gallup et al. (1998) argue for a direct effect of climate on performance. If, indeed, these variables have a direct effect, they are invalid instruments and do not establish that it is institutions that matter. The advantage of our approach is that conditional on the variables we already control for, settler mortality more than 100 years ago should have no effect on output today, other than through its effect on institutions. Interestingly, our results show that distance from the equator does not have an independent effect on economic performance, validating the use of this variable as an instrument in the work by Hall and Jones (1999). The next section outlines our hypothesis and provides supporting historical evidence. Section I1 presents OLS regressions of GDP per capita on our index of institutions. Section I11 describes our key instrument for institutions, the mortality rates faced by potential settlers at the time of colonization. Section IV presents our main results. Section V investigates the robustness of our results. and Section VI concludes. I. The Hypothesis and Historical Background We hypothesize that settler mortality affected settlements; settlements affected early institutions; and early institutions persisted and formed the basis of current institutions. In this section, we discuss and substantiate this hypothesis. The next subsection discusses the link between mortality rates of settlers and settlement decisions, then we discuss differences in colonization policies, and finally, we turn to the causes of institutional persistence. A. Mortality and Settlements There is little doubt that mortality rates were a key determinant of European settlements. Curtin (1964, 1998) documents how both the British and French press informed the public of mortality rates in the colonies. Curtin (1964)

1374 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 also documents how early British expectations including Robinson and Gallagher (1961),Gann for settlement in West Africa were dashed by and Duignan (1962),Denoon (1983),and Cain very high mortality among early settlers,about and Hopkins (1993),have documented the de- half of whom could be expected to die in the velopment of "settler colonies,"where Europe- first year.In the "Province of Freedom"(Sierra ans settled in large numbers,and life was Leone),European mortality in the first year was modeled after the home country.Denoon(1983) 46 percent,in Bulama (April 1792-April 1793) emphasizes that settler colonies had representa- there was 61-percent mortality among Europe- tive institutions which promoted what the set- ans.In the first year of the Sierra Leone Com- tlers wanted and that what they wanted was pany (1792-1793),72 percent of the European freedom and the ability to get rich by engaging settlers died.On Mungo Park's Second Expedi- in trade.He argues that "there was undeniably tion (May-November 1805),87 percent of Eu- something capitalist in the structure of these ropeans died during the overland trip from colonies.Private ownership of land and live- Gambia to the Niger,and all the Europeans died stock was well established very early..."(p. before completing the expedition. 35). An interesting example of the awareness of When the establishment of European-like in- the disease environment comes from the Pil- stitutions did not arise naturally,the settlers grim fathers.They decided to migrate to the were ready to fight for them against the wishes United States rather than Guyana because of the of the home country.Australia is an interesting high mortality rates in Guyana (see Crosby, example here.Most of the early settlers in Aus- 1986 pp.143-44).Another example comes tralia were ex-convicts,but the land was owned from the Beauchamp Committee in 1795,set up largely by ex-jailors,and there was no legal to decide where to send British convicts who protection against the arbitrary power of land- had previously been sent to the United States. owners.The settlers wanted institutions and po- One of the leading proposals was the island of litical rights like those prevailing in England at Lemane,up the Gambia River.The committee the time.They demanded jury trials,freedom rejected this possibility because they decided from arbitrary arrest,and electoral representa- mortality rates would be too high even for the tion.Although the British government resisted convicts.Southwest Africa was also rejected for at first,the settlers argued that they were British health reasons.The final decision was to send and deserved the same rights as in the home convicts to Australia. country (see Robert Hughes,1987).Cain and The eventual expansion of many of the col- Hopkins write (1993 p.237)"from the late onies was also related to the living conditions 1840s the British bowed to local pressures and, there.In places where the early settlers faced in line with observed constitutional changes high mortality rates,there would be less incen- taking place in Britain herself,accepted the idea tive for new settlers to come. that,in mature colonies,governors should in future form ministries from the majority ele- B.Types of Colonization and Settlements ments in elected legislatures."They also sug- gest that "the enormous boom in public The historical evidence supports both the no- investment after 1870 [in New Zealand]...was tion that there was a wide range of different an attempt to build up an infrastructure...to types of colonization and that the presence or maintain high living standards in a country absence of European settlers was a key deter- where voters expected politicians actively to minant of the form colonialism took.Historians, promote their economic welfare."(p.225).6 5 Naturally,other factors also influenced settlements.For 6 Robert H.Bates(1983 Chapter 3)gives a nice example example,despite the relatively high mortality rates,many of the influence of settlers on policy in Africa.The British Europeans migrated to the Caribbean because of the very colonial government pursued many policies that depressed high incomes there at the time (see,e.g.,Richard S.Dunn, the price of cocoa,the main produce of the farmers in 1972;David W.Galenson,1996;Engerman and Sokoloff, Ghana.In contrast,the British government supported the 1997:David Eltis,2000). prices faced by the commercial cereal farmers in Kenya

1374 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 also documents how early British expectations for settlement in West Africa were dashed by very high mortality among early settlers, about half of whom could be expected to die in the first year. In the "Province of Freedom" (Sierra Leone), European mortality in the first year was 46 percent, in Bulama (April 1792-April 1793) there was 61-percent mortality among Europeans. In the first year of the Sierra Leone Company (1792-1793), 72 percent of the European settlers died. On Mungo Park's Second Expedition (May-November 1805), 87 percent of Europeans died during the overland trip from Gambia to the Niger, and all the Europeans died before completing the expedition. An interesting~example of the awareness of the disease environment comes from the Pilgrim fathers. They decided to migrate to the United States rather than Guyana because of the high mortality rates in Guyana (see Crosby, 1986 pp. 143-44). Another example comes from the Beauchamp Committee in 1795, set up to decide where to send British convicts who had previously been sent to the United States. One of the leading proposals was the island of Lemane, up the Gambia River. The committee rejected this possibility because they decided mortality rates would be too high even for the convicts. Southwest Africa was also rejected for health reasons. The final decision was to send convicts to Australia. The eventual expansion of many of the colonies was also related to the living conditions there. In places where the early settlers faced high mortality rates, there would be less incentive for new settlers to come.5 B. Types of Colonization and Settlements The historical evidence supports both the notion that there was a wide range of different types of colonization and that the presence or absence of European settlers was a key determinant of the form colonialism took. Historians, Naturally, other factors also influenced settlements. For example, despite the relatively high mortality rates, many Europeans migrated to the Caribbean because of the very high incomes there at the time (see, e.g., Richard S. Dunn, 1972; David W. Galenson, 1996; Engerman and Sokoloff, 1997; David Eltis, 2000). including Robinson and Gallagher (1961), Gann and Duignan (1962), Denoon (1983), and Cain and Hopkins (1993), have documented the development of "settler colonies," where Europeans settled in large numbers, and life was modeled after the home country. Denoon (1983) emphasizes that settler colonies had representative institutions which promoted what the settlers wanted and that what they wanted was freedom and the ability to get rich by engaging in trade. He argues that "there was undeniably something capitalist in the structure of these colonies. Private ownership of land and livestock was well established very early ..." (p. 35). When the establishment of Euro~ean-like institutions did not arise naturally, the settlers were ready to fight for them against the wishes of the home country. Australia is an interesting example here. Most of the early settlers in Australia were ex-convicts, but the land was owned largely by ex-jailors, and there was no legal protection against the arbitrary power of landowners. The settlers wanted institutions and political rights like those prevailing in England at the time. They demanded jury trials, freedom from arbitrary arrest, and electoral representation. Although the British government resisted at first, the settlers argued that they were British and deserved the same rights as in the home country (see Robert Hughes, 1987). Cain and Hopkins write (1993 p. 237) "from the late 1840s the British bowed to local pressures and, in line with observed constitutional changes taking place in Britain herself, accepted the idea that, in mature colonies, governors should in future form ministries from the majority elements in elected legislatures." They also suggest that "the enormous boom in public investment after 1870 [in New Zealand] ... was an attempt to build up an infrastructure ...to maintain high living standards in a country where voters expected politicians actively to promote their economic welfare." (p. 225).6 Robert H. Bates (1983 Chapter 3) gives a nice example of the influence of settlers on policy in Africa. The British colonial govemment pursued many policies that depressed the price of cocoa, the main produce of the farmers in Ghana. In contrast, the British govemment supported the prices faced by the commercial cereal farmers in Kenya

VOL.91 NO.5 ACEMOGLU ET AL.:THE COLONIAL ORIGINS OF DEVELOPMENT 1375 This is in sharp contrast to the colonial expe- tuned to the interests of business and willing to rience in Latin America during the seventeenth divert resources to ends that the business com- and eighteenth centuries,and in Asia and Africa munity would have found profitable."They find during the nineteenth and early twentieth cen- that before 1885 investment in the British em- turies.The main obiective of the Spanish and pire had a return 25 percent higher than that on the Portuguese colonization was to obtain gold domestic investment,though afterwards the two and other valuables from America.Soon after converged.Andrew Roberts (1976 p.193) the conquest,the Spanish crown granted rights writes:"[from]...1930 to 1940 Britain had kept to land and labor (the encomienda)and set up a for itself 2,400,000 pounds in taxes from the complex mercantilist system of monopolies and Copperbelt,while Northern Rhodesia received trade regulations to extract resources from the from Britain only 136,000 pounds in grants colonies. for development."Similarly,Patrick Manning Europeans developed the slave trade in Af- (1982)estimates that between 1905 and 1914, rica for similar reasons.Before the mid-nine- 50 percent of GDP in Dahomey was extracted teenth century,colonial powers were mostly by the French,and Crawford Young (1994 p. restricted to the African coast and concentrated 125)notes that tax rates in Tunisia were four on monopolizing trade in slaves,gold,and other times as high as in France. valuable commodities-witness the names used Probably the most extreme case of extraction to describe West African countries:the Gold was that of King Leopold of Belgium in the Coast,the Ivory Coast.Thereafter,colonial pol- Congo.Gann and Duignan (1979 p.30)argue icy was driven in part by an element of super- that following the example of the Dutch in power rivalry,but mostly by economic motives. Indonesia,Leopold's philosophy was that "the Michael Crowder (1968 p.50),for example, colonies should be exploited,not by the opera- notes"it is significant that Britain's largest col- tion of a market economy,but by state interven- ony on the West Coast [Nigerial should have tion and compulsory cultivation of cash crops to been the one where her traders were most active be sold to and distributed by the state at con- and bears out the contention that,for Britain trolled prices."Jean-Philippe Peemans (1975) ..flag followed trade."8 Lance E.Davis and calculates that tax rates on Africans in the Robert A.Huttenback (1987 p.307)conclude Congo approached 60 percent of their income that "the colonial Empire provides strong evi- during the 1920's and 1930's.Bogumil Jew- dence for the belief that government was at- siewicki (1983)writes that during the period when Leopold was directly in charge,policy was "based on the violent exploitation of natural and human resources,.”with a consequent“de Bates shows that this was mainly because in Kenya,but not struction of economic and social life...[and] in Ghana,there were a significant number of European ..dismemberment of political structures." settler farmers,who exerted considerable pressure on Overall,there were few constraints on state policy. power in the nonsettler colonies.The colonial 7 See James Lang (1975)and James Lockhart and powers set up authoritarian and absolutist states Stuart B.Schwartz (1983).Migration to Spanish America was limited by the Spanish Crown,in part because of a with the purpose of solidifying their control and desire to keep control of the colonists and limit their facilitating the extraction of resources.Young independence (see,for example,John H.Coatsworth, (1994 p.101)quotes a French official in Africa: 1982).This also gives further support to our notion that "the European commandant is not posted to settlers were able to influence the type of institutions set observe nature,..He has a mission...to impose up in the colonies,even against the wishes of the home country government. regulations,to limit individual liberties...,to 8 Although in almost all cases the main objective of collect taxes."Manning (1988 p.84)summa- colonial policies was to protect economic interests and rizes this as:"In Europe the theories of repre- obtain profits,the recipients of these profits varied.In the sentative democracy won out over the theorists Portuguese case,it was the state;in the Belgian case,it was King Leopold;and in the British case,it was often private of absolutism....But in Africa,the European enterprises who obtained concessions or monopoly trading conquerors set up absolutist governments,based rights in Africa(Crowder,1968 Part III). on reasoning similar to that of Louis XIV

VOL. 91 NO. 5 ACEMOGLU ET AL.: THE COLONIAL ORIGINS OF DEVELOPMENT 1375 This is in sharp contrast to the colonial experience in Latin America during the seventeenth and eighteenth centuries, and in Asia and Africa during the nineteenth and early twentieth centuries. The main objective of the Spanish and the Portuguese colonization was to obtain gold and other valuables from America. Soon after the conquest, the Spanish crown granted rights to land and labor (the encomienda) and set up a complex mercantilist system of monopolies and trade regulations to extract resources from the colonies .7 Europeans developed the slave trade in Africa for similar reasons. Before the mid-nineteenth century, colonial powers were mostly restricted to the African coast and concentrated on monopolizing trade in slaves, gold, and other valuable commodities-witness the names used to describe West African countries: the Gold Coast, the Ivory Coast. Thereafter, colonial policy was driven in part by an element of superpower rivalry, but mostly by economic motives. Michael Crowder (1968 p. 50), for example, notes "it is significant that Britain's largest colony on the West Coast [Nigeria] should have been the one where her traders were most active and bears out the contention that, for Britain ... flag followed trade."' Lance E. Davis and Robert A. Huttenback (1987 p. 307) conclude that "the colonial Empire provides strong evidence for the belief that government was atBates shows that this was mainly because in Kenya, but not in Ghana, there were a significant number of European settler farmers, who exerted considerable pressure on policy. 'See James Lang (1975) and James Lockhart and Stuart B. Schwartz (1983). Migration to Spanish America was limited by the Spanish Crown, in part because of a desire to keep control of the colonists and limit their independence (see, for example, John H. Coatsworth, 1982). This also gives further support to our notion that settlers were able to influence the type of institutions set up in the colonies, even against the wishes of the home country government. Although in almost all cases the main objective of colonial policies was to protect economic interests and obtain profits, the recipients of these profits varied. In the Portuguese case, it was the state; in the Belgian case, it was King Leopold; and in the British case, it was often private enterprises who obtained concessions or monopoly trading rights in Africa (Crowder, 1968 Part 111). tuned to the interests of business and willing to divert resources to ends that the business community would have found profitable." They find that before 1885 investment in the British empire had a return 25 percent higher than that on domestic investment, though afterwards the two converged. Andrew Roberts (1976 p. 193) writes: "[from] ... 1930 to 1940 Britain had kept for itself 2,400,000 pounds in taxes from the Copperbelt, while Northern Rhodesia received from Britain only 136,000 pounds in grants for development." Similarly, Patrick Manning (1982) estimates that between 1905 and 1914, 50 percent of GDP in Dahomey was extracted by the French, and Crawford Young (1994 p. 125) notes that tax rates in Tunisia were four times as high as in France. Probably the most extreme case of extraction was that of King Leopold of Belgium in the Congo. Gann and Duignan (1979 p. 30) argue that following the example of the Dutch in Indonesia, Leopold's philosophy was that "the colonies should be exploited, not by the operation of a market economy, but by state intervention and compulsory cultivation of cash crops to be sold to and distributed by the state at controlled prices." Jean-Philippe Peemans (1 975) calculates that tax rates on Africans in the Congo approached 60 percent of their income during the 1920's and 1930's. Bogumil Jewsiewicki (1983) writes that during the period when Leopold was directly in charge, policy was "based on the violent exploitation of natural and human resources," with a consequent "destruction of economic and social life ... [and] ...dismemberment of political structures." Overall, there were few constraints on state power in the nonsettler colonies. The colonial powers set up authoritarian and absolutist states with the purpose of solidifying their control and facilitating the extraction of resources. Young (1994 p. 101) quotes a French official in Africa: "the European commandant is not posted to observe nature, ...He has a mission ... to impose regulations, to limit individual liberties ..., to collect taxes." Manning (1988 p. 84) summarizes this as: "In Europe the theories of representative democracy won out over the theorists of absolutism ... . But in Africa, the European conquerors set up absolutist governments, based on reasoning similar to that of Louis XIV

1376 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 C.Institutional Persistence There are a number of economic mechanisms that will lead to institutional persistence of this There is a variety of historical evidence,as well type.Here,we discuss three possibilities. as our regressions in Table 3 below,suggesting that the control structures set up in the nonsettler (1)Setting up institutions that place restrictions colonies during the colonial era persisted,while on government power and enforce property there is little doubt that the institutions of law and rights is costly (see,e.g.,Acemoglu and order and private property established during the Thierry Verdier,1998).If the costs of cre- early phases of colonialism in Australia,Canada, ating these institutions have been sunk by New Zealand,the United States,Hong Kong,and the colonial powers,then it may not pay the Singapore have formed the basis of the current- elites at independence to switch to extrac- day institutions of these countries. tive institutions.In contrast,when the new Young emphasizes that the extractive institu- elites inherit extractive institutions,they tions set up by the colonialists persisted long may not want to incur the costs of introduc- after the colonial regime ended.He writes "al- ing better institutions,and may instead though we commonly described the indepen- prefer to exploit the existing extractive in- dent polities as 'new states,'in reality they were stitutions for their own benefits. successors to the colonial regime,inheriting its (2)The gains to an extractive strategy may structures,its quotidian routines and practices, depend on the size of the ruling elite.When and its more hidden normative theories of gov- this elite is small,each member would have ernance"(1994 p.283).An example of the a larger share of the revenues,so the elite persistence of extractive state institutions into may have a greater incentive to be extrac- the independence era is provided by the persis- tive.In many cases where European powers tence of the most prominent extractive policies. set up authoritarian institutions,they dele- In Latin America,the full panoply of monopo- gated the day-to-day running of the state to lies and regulations,which had been created by a small domestic elite.This narrow group Spain,remained intact after independence,for often was the one to control the state most of the nineteenth century.Forced labor after independence and favored extractive policies persisted and were even intensified or institutions.10 reintroduced with the expansion of export agri- (3)If agents make irreversible investments that culture in the latter part of the nineteenth cen- are complementary to a particular set of tury.Slavery persisted in Brazil until 1886,and institutions,they will be more willing to during the sisal boom in Mexico,forced labor support them,making these institutions per- was reintroduced and persisted up to the start of sist (see,e.g.,Acemoglu,1995).For exam- the revolution in 1910.Forced labor was also ple,agents who have invested in human and reintroduced in guatemala and el salvador to physical capital will be in favor of spending provide labor for coffee growing.In the Guate- malan case,forced labor lasted until the creation of democracy in 1945.Similarly,forced labor 10 William Reno (1995),for example,argues that the was reinstated in many independent African governments of postindependence Sierra Leone adopted the tactics and institutions of the British colonizers to cement countries,for example,by Mobutu in Zaire. their political power and extract resources from the rest of society.Catherine Boone (1992)provides a similar analysis of the evolution of the modern state in Senegal.Most scholars also view the roots of authoritarianism under The thesis that institutions persist for a long time goes Mobutu in the colonial state practices in the Belgian Congo back at least to Karl A.Wittfogel (1957),who argued that the (e.g.,Thomas M.Callaghy,1984,or Thomas Turner and control structures set up by the large"hydraulic"empires such Young,1985,especially p.43).The situation in Latin as China,Russia,and the Ottoman Empire persisted for more America is similar.Independence of most Latin American than 500 years to the twentieth century.Engerman and countries came in the early nineteenth century as domestic Sokoloff (1997),La Porta et al.(1998,1999),North et al elites took advantage of the invasion of Spain by Napoleon (1998),and Coatsworth (1999)also argue that colonial insti- to capture the control of the state.But,the only thing that tutions persisted.Engerman et al.(1998)provide further evi- changed was the identity of the recipients of the rents (see, dence supporting this view. for example,Coatsworth,1978,or John Lynch,1986)

1376 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 C. Institutional Persistence There is a variety of historical evidence, as well as our regressions in Table 3 below, suggesting that the control structures set up in the nonsettler colonies during the colonial era persisted, while there is little doubt that the institutions of law and order and private property established during the early phases of colonialism in Australia, Canada, New Zealand, the United States, Hong Kong, and Singapore have formed the basis of the currentday institutions of these countrie~.~ Young emphasizes that the extractive institutions set up by the colonialists persisted long after the colonial regime ended. He writes "although we commonly described the independent polities as 'new states,' in reality they were successors to the colonial regime, inheriting its structures, its quotidian routines and practices, and its more hidden normative theories of governance" (1994 p. 283). An example of the persistence of extractive state institutions into the independence era is provided by the persistence of the most prominent extractive policies. In Latin America, the full panoply of monopolies and regulations, which had been created by Spain, remained intact after independence, for most of the nineteenth century. Forced labor policies persisted and were even intensified or reintroduced with the expansion of export agriculture in the latter part of the nineteenth century. Slavery persisted in Brazil until 1886, and during the sisal boom in Mexico, forced labor was reintroduced and persisted up to the start of the revolution in 1910. Forced labor was also reintroduced in Guatemala and El Salvador to provide labor for coffee growing. In the Guatemalan case, forced labor lasted until the creation of democracy in 1945. Similarly, forced labor was reinstated in many independent African countries, for example, by Mobutu in Zaire. The thesis that institutions persist for a long time goes back at least to Karl A. Wittfogel (1957), who argued that the control stmctures set up by the large "hydraulic" empires such as China, Russia, and the Ottoman Empire persisted for more than 500 years to the twentieth century. Engerman and Sokoloff (1997), La Porta et al. (1998, 1999), North et al. (1998), and Coatsworth (1999) also argue that colonial institutions persisted. Engerman et al. (1998) provide fuither evidence supporting this view. There are a number of economic mechanisms that will lead to institutional persistence of this type. Here, we discuss three possibilities. (1) Setting up institutions that place restrictions on government power and enforce property rights is costly (see, e.g., Acemoglu and Thierry Verdier, 1998). If the costs of creating these institutions have been sunk by the colonial powers, then it may not pay the elites at independence to switch to extractive institutions. In contrast, when the new elites inherit extractive institutions, they may not want to incur the costs of introducing better institutions, and may instead prefer to exploit the existing extractive institutions for their own benefits. (2) The gains to an extractive strategy may depend on the size of the ruling elite. When this elite is small, each member would have a larger share of the revenues, so the elite may have a greater incentive to be extractive. In many cases where European powers set up authoritarian institutions, they delegated the day-to-day running of the state to a small domestic elite. This narrow group often was the one to control the state after independence and favored extractive institutions.1° (3) If agents make irreversible investments that are complementary to a particular set of institutions, they will be more willing to support them, making these institutions persist (see, e.g., Acemoglu, 1995). For example, agents who have invested in human and physical capital will be in favor of spending lo William Reno (1995), for example, argues that the governments of postindependence Sierra Leone adopted the tactics and institutions of the British colonizers to cement their political power and extract resources from the rest of society. Catherine Boone (1992) provides a similar analysis of the evolution of the modern state in Senegal. Most scholars also view the roots of authoritarianism under Mobutu in the colonial state practices in the Belgian Congo (e.g., Thomas M. Callaghy, 1984, or Thomas Turner and Young, 1985, especially p. 43). The situation in Latin America is similar. Independence of most Latin American countlies came in the early nineteenth century as domestic elites took advantage of the invasion of Spain by Napoleon to capture the control of the state. But, the only thing that changed was the identity of the recipients of the rents (see, for example, Coatsworth, 1978, or John Lynch, 1986)

VOL.91 NO.5 ACEMOGLU ET AL:THE COLONIAL ORIGINS OF DEVELOPMENT 1377 TABLE 1-DESCRIPTIVE STATISTICS By quartiles of mortality Whole world Base sample (1) (2) (3) (4) Log GDP per capita (PPP)in 1995 8.3 8.05 8.9 8.4 7.73 7.2 (1.1) (1.1) Log output per worker in 1988 -1.70 -1.93 -1.03 -1.46 -2.20 -3.03 (with level of United States (1.1) (1.0) normalized to 1) Average protection against 7 6.5 7.9 6.5 6 5.9 expropriation risk,1985-1995 (1.8) (1.5) Constraint on executive in 1990 3.6 4 5.3 5.1 3.3 2.3 (2.3) (2.3) Constraint on executive in 1900 1.9 2.3 3.7 3.4 1.1 1 (1.8) (2.1) Constraint on executive in first year 3.6 3.3 4.8 2.4 3. 3.4 of independence (2.4) (2.4) Democracy in 1900 1.1 1.6 3.9 2.8 0.19 0 (2.6) (3.0) European settlements in 1900 0.31 0.16 0.32 0.26 0.08 0.005 (0.4) (0.3) Log European settler mortality n.a. 4.7 3.0 4.3 4.9 6.3 (1.1) Number of observations 163 64 14 18 17 15 Notes:Standard deviations are in parentheses.Mortality is potential settler mortality,measured in terms of deaths per annum per 1,000"mean strength"(raw mortality numbers are adjusted to what they would be if a force of 1,000 living people were kept in place for a whole year,e.g.,it is possible for this number to exceed 1,000 in episodes of extreme mortality as those who die are replaced with new arrivals).Sources and methods for mortality are described in Section III,subsection B,and in the unpublished Appendix(available from the authors;or see Acemoglu et al.,2000).Quartiles of mortality are for our base sample of 64 observations.These are:(1)less than 65.4;(2)greater than or equal to 65.4 and less than 78.1;(3)greater than or equal to 78.1 and less than 280;(4)greater than or equal to 280.The number of observations differs by variable;see Appendix Table Al for details. money to enforce property rights,while and our basic sample,and the standard devia- those who have less to lose may not be. tion of log income per capita in both cases is 1.1.In row 3,we also give output per worker in II.Institutions and Performance: 1988 from Hall and Jones (1999)as an alterna- OLS Estimates tive measure of income today.Hall and Jones (1999)prefer this measure since it explicitly A.Data and Descriptive Statistics refers to worker productivity.On the other hand,given the difficulty of measuring the for- Table 1 provides descriptive statistics for the mal labor force,it may be a more noisy measure key variables of interest.The first column is for of economic performance than income per the whole world,and column(2)is for our base capita. sample,limited to the 64 countries that were We use a variety of variables to capture in- ex-colonies and for which we have settler mor- stitutional differences.Our main variable,re- tality,protection against expropriation risk,and ported in the second row,is an index of GDP data (this is smaller than the sample in protection against expropriation.These data are Figure 1).The GDP per capita in 1995 is PPP from Political Risk Services (see,e.g.,William adjusted (a more detailed discussion of all data D.Coplin et al.,1991),and were first used in the sources is provided in Appendix Table Al). economics and political science literatures by Income (GDP)per capita will be our measure of Knack and Keefer (1995).Political Risk Ser- economic outcome.There are large differences vices reports a value between 0 and 10 for each in income per capita in both the world sample country and year,with 0 corresponding to the

VOL. 91 NO. 5 ACEMOGLU ET AL.: THE COLONIAL ORIGINS OF DEVELOPMENT 1377 By quartiles of mortality Whole world Base sample (1) (2) (3) (4) Log GDP per capita (PPP) in 1995 Log output per worker in 1988 (with level of United States normalized to 1) Average protection against expropriation risk, 1985-1995 Constraint on executive in 1990 Constraint on executive in 1900 Constraint on executive in first year of independence Democracy in 1900 European settlements in 1900 Log European settler mortality Number of observations Notes: Standard deviations are in parentheses. Mortality is potential settler mortality, measured in terms of deaths per annum per 1,000 "mean strength" (raw mortality numbers are adjusted to what they would be if a force of 1,000 living people were kept in place for a whole year, e.g., it is possible for this number to exceed 1,000 in episodes of extreme mortality as those who die are replaced with new arrivals). Sources and methods for mortality are described in Section 111, subsection B, and in the unpublished Appendix (available from the authors; or see Acemoglu et al., 2000). Quartiles of mortality are for our base sample of 64 observations. These are: (1) less than 65.4; (2) greater than or equal to 65.4 and less than 78.1; (3) greater than or equal to 78.1 and less than 280; (4) greater than or equal to 280. The number of observations differs by variable; see Appendix Table A1 for details. money to enforce property rights, while and our basic sample, and the standard deviathose who have less to lose may not be. tion of log income per capita in both cases is 1.1. In row 3, we also give output per worker in 11. Institutions and Performance: 1988 from Hall and Jones (1999) as an alternaOLS Estimates tive measure of income today. Hall and Jones (1999) prefer this measure since it explicitly A. Data and Descriptive Statistics refers to worker productivity. On the other hand, given the difficulty of measuring the forTable 1 provides descriptive statistics for the mal labor force, it may be a more noisy measure key variables of interest. The first column is for of economic performance than income per the whole world, and column (2) is for our base capita. sample, limited to the 64 countries that were We use a variety of variables to capture inex-colonies and for which we have settler mor- stitutional difference~. Our main variable, retality, protection against expropriation risk, and ported in the second row, is an index of GDP data (this is smaller than the sample in protection against expropriation. These data are Figure 1). The GDP per capita in 1995 is PPP from Political Risk Services (see, e.g., William adjusted (a more detailed discussion of all data D. Coplin et al., 1991), and were first used in the sources is provided in Appendix Table Al). economics and political science literatures by Income (GDP) per capita will be our measure of Knack and Keefer (1995). Political Risk Sereconomic outcome. There are large differences vices reports a value between 0 and 10 for each in income per capita in both the world sample country and year, with 0 corresponding to the

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