Working Paper: NBER ID: w12613
Authors: Shilpi Kapur; Sukkoo Kim
Abstract: We explore the impact of British colonial institutions on the economic development of India. In some regions, the British colonial government assigned property rights in land and taxes to landlords whereas in others it assigned them directly to cultivators or non-landlords. Although Banerjee and Iyer (2005) find that agricultural productivity of non-landlord areas diverged and out-performed relative to landlord areas after 1965 with the advent of the Green Revolution, we find evidence of superior economic performance of non-landlord regions in both the pre- and the post-independence periods. We believe that landlord and non-landlord regions diverged because their differing property rights institutions led to differences in incentives for development.
Keywords: British colonial institutions; economic development; property rights; India; agricultural productivity
JEL Codes: N45; O10; P14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Assignment of property rights to landlords in certain regions (P14) | Divergence in economic performance compared to regions where rights were assigned to cultivators (P26) |
| Nonlandlord regions (R33) | Superior economic outcomes (P19) |
| Divergence in economic performance (F62) | Differences in incentives for agricultural productivity and investment in public goods (H40) |
| Nonlandlord areas (R33) | Increased specialization in nonfood crops and higher employment shares in manufacturing and services (O14) |
| Agency costs and property rights uncertainty in landlord areas (P14) | Hindered agricultural investments and productivity (O13) |
| Institutional frameworks established during the colonial period (F54) | Lasting effects on the economic trajectories of these regions (R11) |
| Green revolution (Q16) | Favoring of nonlandlord regions due to their institutional advantages (R38) |