Did History Breed Inequality? Colonial Factor Endowments and Modern Income Distribution

CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No 08/86

65 Pages Posted: 24 Jun 2008

See all articles by Matthew J. Baker

Matthew J. Baker

affiliation not provided to SSRN

Christa N. Brunnschweiler

Norwegian University of Science and Technology (NTNU) - Department of Economics; University of Oxford - OxCarre

Erwin H. Bulte

Tilburg University - Department of Economics; Wageningen University

Date Written: June 2008

Abstract

We explore the relation between historical population density in former colonies and modern income distribution. A theoretical model highlights the potentially opposing effects of native population density on incentives for colonists to conquer or settle in new territories. While an abundant supply of native labor is an "asset" that drives up land rents, it is also a "liability" that makes land acquisition by colonists more difficult and reduces returns to peacable migration. Conflicts over land, sowing the seeds for inequality by creating a landed elite living off rents, are especially likely to emerge for intermediate native population densities. Results are confirmed by detailed empirical tests highlighting the curvilinear relationship between native population density and modern income inequality. Finally, using population density as an instrument for inequality in the former colonies, we demonstrate that there is no causal relationship running from income distribution to economic growth.

Keywords: inequality, growth, factor endowments, population density, conflict, colonization

JEL Classification: O15, N30, N50

Suggested Citation

Baker, Matthew J. and Brunnschweiler, Christa N. and Bulte, Erwin H., Did History Breed Inequality? Colonial Factor Endowments and Modern Income Distribution (June 2008). CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No 08/86, Available at SSRN: https://ssrn.com/abstract=1150752 or http://dx.doi.org/10.2139/ssrn.1150752

Matthew J. Baker (Contact Author)

affiliation not provided to SSRN

Christa N. Brunnschweiler

Norwegian University of Science and Technology (NTNU) - Department of Economics ( email )

N-7491 Trondheim
Norway

University of Oxford - OxCarre ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Erwin H. Bulte

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 9111 (Phone)

Wageningen University

Hollandseweg 1
6706 KN
Wageningen
Netherlands

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