Question

In their article, ”The Colonial Origins of Comparative Development: An Empirical Investigation,“ Acemoglu, Johnson and Robinson (2001) claim to have established a causal effect of institutional quality on per capita income. Briey explain the argument upon which this claim is based.

Answer 1

The study conducted by the authors reveals the different type of institutions set up within the colonies by the Europeans and the impact of these institutions upon the development of people in terms of per capita income and mortality rates. It is understood that nature and quality of institutions play a role of catalyst. It can be a inclusive institution or extractive institutions in the colonies. Inclusive institutions involved larger participation of the population, contributed in the development of infrastructure, different industries and other avenues that could create employment opportunities for the people. These development work delivered a causal effect to raise the per capita income of the people. It improved the quality of life and reduced the mortality rates in those colonies. While, extractive institutions exploited the population and could not make the similar impact upon the income level as that of inclusive type of institution. It justifies the claim that the quality of the institutions is decided by the initiatives, visionary decisions and its positive impact upon the community. It creates the system that works for the benefit of the people and income level rises. The study, observes the same when institutions were developed in the colonies in Africa and Ecuador.

Reference:

The Colonial Origins of Comparative Development: An Empirical Investigation. Retrieved from: https://economics.mit.edu

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