Working Paper: NBER ID: w14604
Authors: Peter Blair Henry; Conrad Miller
Abstract: Recent work emphasizes the primacy of differences in countries' colonially-bequeathed property rights and legal systems for explaining differences in their subsequent economic development. Barbados and Jamaica provide a striking counter example to this long-run view of income determination. Both countries inherited property rights and legal institutions from their English colonial masters yet experienced starkly different growth trajectories in the aftermath of independence. From 1960 to 2002, Barbados' GDP per capita grew roughly three times as fast as Jamaica's. Consequently, the income gap between Barbados and Jamaica is now almost five times larger than at the time of independence. Since their property rights and legal systems are virtually identical, recent theories of development cannot explain the divergence between Barbados and Jamaica. Differences in macroeconomic policy choices, not differences in institutions, account for the heterogeneous growth experiences of these two Caribbean nations.
Keywords: Macroeconomic Policy; Economic Growth; Barbados; Jamaica; Colonial Legacy
JEL Codes: E00; F00; N00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| macroeconomic policy choices (E60) | economic trajectories of Barbados and Jamaica (N16) |
| Jamaica's shift towards extensive state intervention and nationalization under the PNP (P26) | significant economic downturn (F44) |
| Barbados maintained a more stable economic policy environment (N16) | superior economic performance (P17) |
| Jamaica's fiscal deficit averaging 15.5% of GDP during the PNP's tenure (H69) | economic stability (E63) |
| Barbados kept its fiscal deficit under control (H68) | better economic stability and growth (O52) |
| Jamaica's inflation rate surged while investment collapsed (N16) | exacerbating economic woes (F69) |
| differences in policy responses to external shocks (F42) | shaping economic outcomes of both nations (F55) |