1374 THE AMERICAN ECONOMIC REVIEW DECEMBER 200 and Hopkins(193).have doc the de could be expected to die in the velopment of setter colonies."where Europ In the "Pr ans arge numbers nd lil 1082 46 percent,in Bulama (April 1792 April 1793 emphasizes that setter colonies had repre esenta ch promoted what the se freedom and the ability to get rich by en Second Exp in trade He argues that"here was ans died ing the and r tand and I r,and all the Europeans died stock was well established very early."(p efore ompleting the 35) hen the establishment of e n-like it the dise ironment c 、from the Pil- They decided to migrate to ist the wi high mortality rates in Guyana (see Crosh Another example come tralia were ex-convicts.but the land was owne by cx-jath there was no f land had previously been sent to the United State One of the le ding pr was the island of from arbitrary arrest,and electoral re mortality rates would be too high even for the tio.ho the British ovement resiste health re The final decision was to send and des ved the s convicts to Australia. country (see Robert Hughes,1987).Cain and 1237 from the lat there.I places where he arly stters faced in line with observed constitutional change igh mortality r es.there taking placc in Britain herself.accepte the ide tive for new se future form ministries from the majo B.Types of Colonization and Settlements ments in elected legislatures. They also sug The historical evidence tion that therewa ts both the nt aft inge of different an attempt to build up an infrastructure.to types of and that the pe esence or maintain high living standards in a counr minant of the form promote their comomi welfare.(. Naturally,other factors also influe ced settlet Ro rt H.Bate s (1983 Chat s,ma uenc ders on 4.The I a.the main 1996;Engerman and Sokolof
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 Europe- ans. In the first year of the Sierra Leone Com- pany (1792-1793), 72 percent of the European settlers died. On Mungo Park's Second Expedi- tion (May-November 1805), 87 percent of Eu- ropeans 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 Pil- grim 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 col- onies was also related to the living conditions there. In places where the early settlers faced high mortality rates, there would be less incen- tive for new settlers to come.5 B. Types of Colonization and Settlements The historical evidence supports both the no- tion that there was a wide range of different types of colonization and that the presence or absence of European settlers was a key deter- minant of the form colonialism took. Historians, including Robinson and Gallagher (1961), Gann and Duignan (1962), Denoon (1983), and Cain and Hopkins (1993), have documented the de- velopment of "settler colonies," where Europe- ans settled in large numbers, and life was modeled after the home country. Denoon (1983) emphasizes that settler colonies had representa- tive institutions which promoted what the set- tlers 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 live- stock was well established very early ." (p. 35). When the establishment of European-like in- stitutions 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 Aus- tralia were ex-convicts, but the land was owned largely by ex-jailors, and there was no legal protection against the arbitrary power of land- owners. The settlers wanted institutions and po- litical rights like those prevailing in England at the time. They demanded jury trials, freedom from arbitrary arrest, and electoral representa- tion. 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 ele- ments in elected legislatures." They also sug- gest 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 5 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). 6 Robert H. Bates (1983 Chapter 3) gives a nice example of the influence of settlers on policy in Africa. The British colonial government pursued many policies that depressed the price of cocoa, the main produce of the farmers in Ghana. In contrast, the British government supported the prices faced by the commercial cereal farmers in Kenya. This content downloaded from 202.114.238.230 on Mon, 28 Oct 2024 05:17:22 UTC All use subject to /s/about.jstor.org/terms
VOL 9I NO.5 ACEMOGLU ET AL:THE COLONIAL ORIGINS OF DEVELOPMENT 135 munity would have found profitable. that be the Por er th rds the and other valuables from America.Soon after Andrew Roberts (1976D 193 Spanish crown gran 0.00 complex mercantilist system of monopolies and Copperbelt,while Northern Rhodesia received trade regulations to extract resources from the Britain only 6 pound peans developed the slave trade in af rica for similar reasons Before the mid-nin 50 percent of GDP in Dahomey was extracted were mostl 12s the French,and on monopolizing trade in slaves, old,and othe times as high as in France valuable -witness ably most extr nan(1979 icy was driver part by an element of super ng the ex of the. Dutch alry, vder (1068 ould be by the notes"it is significant that Britain' tion of a,but by state interver ony on the ast [Nigeria n crops t and bea outh co that, for Britain trolled prices."Jean-Philipp Peemans (1975 Da tha t tax rates on Afr thatthe colonial Empire provides stron g evi during the 1920's and 1930's.Bogumil ew dence for the belief that government was at- during the perio and human or with a conse nt“d e in Ke but no struction of economic social life .[and] raints on stat power in the nonsettler colon The colonia s Lockhart and anish A d limit thei the extraction of resources cial in Afri t notion tha 94 p.101)quotes a French offic observe nature.He has a mission mit indivi 1988 sentative democrac of absolutism. Bu ightshAncaCader963gP2irmonopolytndineg 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 expe- rience in Latin America during the seventeenth and eighteenth centuries, and in Asia and Africa during the nineteenth and early twentieth cen- turies. 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 Af- rica for similar reasons. Before the mid-nine- teenth 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 Aflican countries: the Gold Coast, the Ivory Coast. Thereafter, colonial pol- icy was driven in part by an element of super- power rivalry, but mostly by economic motives. Michael Crowder (1968 p. 50), for example, notes "it is significant that Britain's largest col- ony 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."8 Lance E. Davis and Robert A. Huttenback (1987 p. 307) conclude that "the colonial Empire provides strong evi- dence for the belief that government was at- tuned to the interests of business and willing to divert resources to ends that the business com- munity would have found profitable." They find that before 1885 investment in the British em- pire 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 opera- tion of a market economy, but by state interven- tion and compulsory cultivation of cash crops to be sold to and distributed by the state at con- trolled prices." Jean-Philippe Peemans (1975) calculates that tax rates on Africans in the Congo approached 60 percent of their income during the 1920's and 1930's. Bogumil Jew- 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- struction 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) summa- rizes this as: "In Europe the theories of repre- sentative 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." Bates 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. 7 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. 8 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 III). This content downloaded from 202.114.238.230 on Mon, 28 Oct 2024 05:17:22 UTC All use subject to /s/about.jstor.org/terms
1376 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 C.Institutional Persistence There is a varicty of historica ince.as el type.Here,we discuss three possibilities. mol st olonies during the colonial era persisted,whil ( on g there is littled ibt that the instit T costly (se Acemoglu an ating these institutions have been sunk b the powers.then it may not pay the when the Young emphasizes that the extractive institu elites inherit extractive institutions,they tions set up by th may not want to incur the c ts of int ribed the indepen- dent politics as'new (2)Th itutions for their own bencfits end on the siof Whe this elite is small,each member would hav 19 ay hay share the independence era is provided by the persis setep,authoritarianinstiutions es and regulations.which had been created a small domestic elite.This narrow independer extractive ion of export agri (3)If agents make irreversible investments that til 18 during the sisal boom in Mexico.forced labo support them.making these institutions per For exan in 1945.Similarly was reinstated in many independent African countries,for example,by Mobutu in Zaire. es fro m the rest 2)pr irepesistedfornc ost Lati 1997 1998a rth (1999 (190 for,197,oro Lynch.196)
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 current- day institutions of these countries.9 Young emphasizes that the extractive institu- tions set up by the colonialists persisted long after the colonial regime ended. He writes "al- though we commonly described the indepen- dent 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 gov- ernance" (1994 p. 283). An example of the persistence of extractive state institutions into the independence era is provided by the persis- tence of the most prominent extractive policies. In Latin America, the full panoply of monopo- lies 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 agri- culture in the latter part of the nineteenth cen- tury. 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 Guate- malan 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. 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 cre- ating these institutions have been sunk by the colonial powers, then it may not pay the elites at independence to switch to extrac- tive institutions. In contrast, when the new elites inherit extractive institutions, they may not want to incur the costs of introduc- ing better institutions, and may instead prefer to exploit the existing extractive in- stitutions 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 extrac- tive. In many cases where European powers set up authoritarian institutions, they dele- gated 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. 10 (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 per- sist (see, e.g., Acemoglu, 1995). For exam- ple, agents who have invested in human and physical capital will be in favor of spending 9 The thesis that institutions persist for a long time goes back at least to Karl A. Wittfogel (1957), who argued that the control structures 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 insti- tutions persisted. Engerman et al. (1998) provide further evi- dence supporting this view. 10 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). This content downloaded from 202.114.238.230 on Mon, 28 Oct 2024 05:17:22 UTC All use subject to /s/about.jstor.org/terms
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 21 4 Log GDP per capita(PPP)in1995 05 84 7.73 72 -1.03 -146 -2.20 -3.03 (1.1) (1.0 Average 19 65 6 59 o0ietl98f195 (1.8 5.3 5.1 3.3 23 Constraint on executive in 1900 3.7 3.4 3.1 24 Democracy in1 24 39 2.8 01g European sertlements in19 0.32 0.08 0.005 Log European settler mortality 03 3.0 4.3 4.9 63 Number of observations 163 14 18 17 15 per annu e.g wit s).So n S n B qual to 78.1 and our basic sample.and the standard devia tion of log income per capita in both cases is also give II.Institutio per worker i tive measure of income today.Hall and Jone A.Data and Descriptive Statistics (1)prefer this measure hand .given the difficulty of measuring the for Table 1 provides descriptive statistics for the key van orid and sample,limited to the 64 countries that were and for which we ha sa variety of stitutional differenc Our main vari GDP data (this is smaller than the s Figure 1).The GD D.Cop olitical Risk cs（se .g.William ided in An ndix Table Al) eta d lite Income(GDP)per capita will be our measure of Knack and Keefer(1995).Political Risk Se vices reports a valu mp ntry a ding to
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 3.1 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 those who have less to lose may not be. II. Institutions and Performance: OLS Estimates A. Data and Descriptive Statistics Table 1 provides descriptive statistics for the key variables of interest. The first column is for the whole world, and column (2) is for our base sample, limited to the 64 countries that were ex-colonies and for which we have settler mor- tality, protection against expropriation risk, and GDP data (this is smaller than the sample in Figure 1). The GDP per capita in 1995 is PPP adjusted (a more detailed discussion of all data sources is provided in Appendix Table Al). Income (GDP) per capita will be our measure of economic outcome. There are large differences in income per capita in both the world sample and our basic sample, and the standard devia- tion of log income per capita in both cases is 1.1. In row 3, we also give output per worker in 1988 from Hall and Jones (1999) as an alterna- tive measure of income today. Hall and Jones (1999) prefer this measure since it explicitly refers to worker productivity. On the other hand, given the difficulty of measuring the for- mal labor force, it may be a more noisy measure of economic performance than income per capita. We use a variety of variables to capture in- stitutional differences. Our main variable, re- ported in the second row, is an index of protection against expropriation. These data are from Political Risk Services (see, e.g., William D. Coplin et al., 1991), and were first used in the economics and political science literatures by Knack and Keefer (1995). Political Risk Ser- vices reports a value between 0 and 10 for each country and year, with 0 corresponding to the This content downloaded from 202.114.238.230 on Mon, 28 Oct 2024 05:17:22 UTC All use subject to /s/about.jstor.org/terms
1378 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 ectio agains 1985 and more detail in the next section). oriate for our nu es since the focus here is on B.Ordinary Least-Squares Regressions differences in institutions originating from dif erent types o spond to a low value of this index,while the protection againstexp ropriation variable in a radition of rule of law and w con log y=u aR.+X'y+e of G 1007 ountry i R i using the constraints on the executive and other neasures are in Acemoglu et al.(2000) vector of other The next three rows give measures of early throughout the paper is the effect of institu. nstitutions from the same Gurr on inc 00and the that in is a stro lation be that were the inst ore.In the following row, we report the mean sample is quite similar to that in the whole andctedaldetioear2 worid,and Figure 2 shows this relationship di as an altemative mea The column (1)indicates that c er 50 percent of the ulation of eu an dese nt in 1900 which our measure of European se sense of the magnitude of the effect of institu 0975 tions on perforn tutional measure in this s approx The r emaining columns s give descriptive sta- ndex 78.The at diffe indicates th there should be 1.14 g-point dit De h din 2-fold difference .D).In pra tice,this D log points (approxi nvest e Po acal an Ho 19951.ik0 sal it would im s a in any ca din Acemo Many social entists includin Monte squieu(19),Diamond (1),and
1378 THE AMERICAN ECONOMIC REVIEW DECEMBER 2001 lowest protection against expropriation. We use the average value for each country between 1985 and 1995 (values are missing for many countries before 1985). This measure is appro- priate for our purposes since the focus here is on differences in institutions originating from dif- ferent types of states and state policies. We expect our notion of extractive state to corre- spond to a low value of this index, while the tradition of rule of law and well-enforced prop- erty rights should correspond to high values.11 The next row gives an alternative measure, con- straints on the executive in 1990, coded from the Polity III data set of Ted Robert Gurr and associates (an update of Gurr, 1997). Results using the constraints on the executive and other measures are reported in Acemoglu et al. (2000) and are not repeated here. The next three rows give measures of early institutions from the same Gurr data set. The first is a measure of constraints on the executive in 1900 and the second is an index of democ- racy in 1900. This information is not available for countries that were still colonies in 1900, so we assign these countries the lowest possible score. In the following row, we report the mean and standard deviation of constraints on the executive in the first year of independence (i.e., the first year a country enters the Gurr data set) as an alternative measure of institutions. The second-to-last row gives the fraction of the pop- ulation of European descent in 1900, which is our measure of European settlement in the col- onies, constructed from McEvedy and Jones (1975) and Curtin et al. (1995). The final row gives the logarithm of the baseline settler mor- tality estimates; the raw data are in Appendix Table A2. The remaining columns give descriptive sta- tistics for groups of countries at different quar- tiles of the settler mortality distribution. This is useful since settler mortality is our instrument for institutions (this variable is described in more detail in the next section). B. Ordinary Least-Squares Regressions Table 2 reports ordinary least-squares (OLS) regressions of log per capita income on the protection against expropriation variable in a variety of samples. The linear regressions are for the equation (1) logyi=i+ aRi+Xy+ ei, where yi is income per capita in country i, Ri is the protection against expropriation measure, Xi is a vector of other covariates, and ei is a random error term. The coefficient of interest throughout the paper is a, the effect of institu- tions on income per capita. Column (1) shows that in the whole world sample there is a strong correlation between our measure of institutions and income per capita. Column (2) shows that the impact of the insti- tutions variable on income per capita in our base sample is quite similar to that in the whole world, and Figure 2 shows this relationship di- agrammatically for our base sample consisting of 64 countries. The R2 of the regression in column (1) indicates that over 50 percent of the variation in income per capita is associated with variation in this index of institutions. To get a sense of the magnitude of the effect of institu- tions on performance, let us compare two coun- tries, Nigeria, which has approximately the 25th percentile of the institutional measure in this sample, 5.6, and Chile, which has approxi- mately the 75th percentile of the institutions index, 7.8. The estimate in column (1), 0.52, indicates that there should be on average a 1.14- log-point difference between the log GDPs of the corresponding countries (or approximately a 2-fold difference-e1 . 14- 1 2.1). In prac- tice, this GDP gap is 253 log points (approxi- mately 1-fold). Therefore, if the effect estimated in Table 2 were causal, it would im- ply a fairly large effect of institutions on per- formance, but still much less than the actual income gap between Nigeria and Chile. Many social scientists, including Monte- squieu [1784] (1989), Diamond (1997), and " The protection against expropriation variable is spe- cifically for foreign investment, since Political and Risk Services construct these data for foreign investors. How- ever, as noted by Knack and Keefer (1995), risk of expro- priation of foreign and domestic investments are very highly correlated, and risk of expropriation of foreign investment may be more comparable across countries. In any case, all our results hold also with a variety of other measures of institutions (see Tables 4a, b, c, d, and e in Acemoglu et al., 2000, available from the authors). This content downloaded from 202.114.238.230 on Mon, 28 Oct 2024 05:17:22 UTC All use subject to /s/about.jstor.org/terms