Working Paper: NBER ID: w4488
Authors: Herschel I. Grossman; Murat Lyigun
Abstract: Between 1946 and 1976, the European powers granted independence to all of their large colonies in Africa and Southeast Asia. This paper attempts to provide an economic explanation for this remarkable ending to the era of colonialism. The main theoretical innovation is to consider the effect of population increase on the allocation of time by the indigenous population between productive and subversive activities. The analysis suggests that the increase in population during the colonial period increased the potential return to extralegal appropriation of the profits of colonial companies until the colonies became a net burden on the metropolitan governments. The analysis also suggests that there was less subversive activity in colonies in which the market for indigenous labor was monopsonized because monopsonistic employers internalized the potential negative effect of extralegal appropriation on net profits.
Keywords: Colonialism; Population Growth; Labor Markets; Economic History
JEL Codes: N50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Population Increase (J11) | Allocation of Time between Productive and Subversive Activities (J29) |
| Population Increase (J11) | Potential Returns to Extralegal Appropriation (K49) |
| Labor Market Structure (Competitive) (J42) | Subversive Activity (P37) |
| Labor Market Structure (Monopsonized) (J42) | Subversive Activity (P37) |
| Population Growth (J11) | Economic Behavior (D22) |
| Population Growth (J11) | Profits for Colonial Companies (F54) |
| Population Growth (J11) | Increased Subversive Activity (P37) |
| Increased Subversive Activity (P37) | Declining Profits (E11) |