Working Paper: CEPR ID: DP3206
Authors: Jeffrey B. Nugent; James A. Robinson
Abstract: In recent theories of comparative development the role of institutional differences has been crucial. Yet what explains comparative institutional evolution? We investigate this issue by studying the coffee exporting economies of Latin America. While homogeneous in many ways, they experienced radically different paths of economic (and political) development which is conventional traced to the differential organization of the coffee industry. We show that the different forms that the coffee economy took in the 19th century was critically determined by the legal environment determining access to land, and that different laws resulted from differences in the nature of political competition. Our analysis suggests that explanations of institutional differences that stress economic fundamentals can only be part of the story. At least in the economies we study, while geography, factor endowments and technology are clearly important, their implications for the institutional structure and thus development are conditional on the form that political competition takes in society. Endowments are not fate.
Keywords: development; inequality; organization; political economy
JEL Codes: H00; K20; N50; O10; Q10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Organization of coffee production (smallholders) (D20) | GDP per capita (O49) |
| Organization of coffee production (smallholders) (D20) | Human capital accumulation (J24) |
| Legal environment favoring smallholders (Q15) | Organization of coffee production (smallholders) (D20) |
| Legal environment favoring smallholders (Q15) | Economic performance (P17) |
| Political competition (D72) | Legal environment favoring smallholders (Q15) |
| Plantation system (P13) | Human capital investment (J24) |
| Plantation system (P13) | Economic performance (P17) |
| Political competition in CRC (D72) | Legal protections for smallholders (Q15) |
| Political elite in ESG (H11) | Plantation economies (P19) |