Acemoglu D., Johnson S., Robinson J.A. The Colonial Origins of Comparative Development: An Empirical Investigation

Source: The American Economic Review, Vol. 91, No. 5 (Dec. , 2001), pp. 1369-1401We 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
differencesi n Europeanm ortalityr ates as an instrumenfto r currenti nstitutions,w e
estimate large effects of institutions on income per capita. Once the effect of
institutions is controlledfor, countries in Africa or those closer to the equator do not
have lower incomes