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 isVOL. 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 mortal￾ity rates and current institutions, which is inter￾esting 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 determi￾nant of early institutions (in practice, institu￾tions in 1900); and there is a strong correlation between early institutions and institutions to￾day. Our two-stage least-squares estimate of the effect of institutions on performance is rela￾tively precisely estimated and large. For ex￾ample, it implies that improving Nigeria's institutions," including constraints on government expropri￾ation, 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 empir￾ical 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 in￾strumental variable regression is that, condi￾tional 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 mor￾tality 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 esti￾mates 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 dis￾eases were fatal to Europeans who had no im￾munity, they had limited effect on indigenous adults who had developed various types of im￾munities. 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