Working Paper: NBER ID: w18162
Authors: William Easterly; Ross Levine
Abstract: Although a large literature argues that European settlement outside of Europe shaped institutional, educational, technological, cultural, and economic outcomes, researchers have been unable to directly assess these predictions because of an absence of data on colonial European settlement. In this paper, we construct a new database on the European share of the population during colonization and examine its association with the level of economic development today. We find: (1) a strong and uniformly positive relationship between colonial European settlement and development, (2) a stronger relationship between colonial European settlement and economic development today than between development today and the proportion of the population of European descent today; and (3) no evidence that the positive relationship between colonial European settlement and economic development diminishes or becomes negative at very low levels of colonial European settlement, contradicting a large literature that focuses on the enduring adverse effects of small European settlements creating extractive institutions. The most plausible explanation of our findings is that any adverse effect of extractive institutions associated with minority European settlement was more than offset by other things the European settlers brought with them, such as human capital and technology.
Keywords: European settlement; Economic development; Colonialism; Institutions; Human capital
JEL Codes: N10; O1; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| colonial European settlement (F54) | current economic development (O29) |
| higher proportions of Europeans during colonization (F54) | higher per capita GDP today (P17) |
| colonial European settlement (F54) | current economic development stronger than current European descent (O52) |
| low levels of colonial European settlement (N91) | stronger relationship with economic development (O29) |
| benefits from European settlers (N91) | positive development outcomes (O15) |