Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States

54 Pages Posted: 8 Mar 2000 Last revised: 8 Sep 2010

See all articles by Stanley L. Engerman

Stanley L. Engerman

University of Rochester - Department of Economics; National Bureau of Economic Research (NBER)

Kenneth L. Sokoloff

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 1994

Abstract

Many scholars are concerned with why the U.S. and Canada have been so much more successful over time than other New World economies. Since all New World societies enjoyed high levels of product per capita early in their histories, the divergence in paths can be traced back to the achievement of sustained economic growth by the U.S. and Canada during the 18th to early 19th centuries. This paper highlights the relevance of differences in the degree of inequality in wealth, human capital, and political power in accounting for the variation in the records of growth, and suggest that the roots of inequality lay in differences in the initial factor endowments of the respective colonies The large concentration of Native Americans, and the suitability of cultiva- ting sugar and other crops were key in generating extreme inequality. This encouraged the evolution of societies where small elites of European descent held highly disproportionate shares of the wealth, human capital and political power, and dominated the population economically and politically. Absent from the nearly all-inclusive list of New World colonies with these conditions were the British settlements in the northern part of the North American continent. Next, we discuss the tendencies of government policies to maintain these conditions along the respective economy's path of development. Finally, we explore the effects of inequality on the evolution of institutions conducive to participation in the commercial economy, markets and technological change during this specific era, and suggest that their greater equality in wealth, human capital, and political capital and power may have predisposed the U.S. and Canada toward earlier realization of sustained economic growth.

Suggested Citation

Engerman, Stanley L. and Sokoloff, Kenneth L., Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States (December 1994). NBER Working Paper No. h0066. Available at SSRN: https://ssrn.com/abstract=190403

Stanley L. Engerman (Contact Author)

University of Rochester - Department of Economics ( email )

Harkness Hall
Rochester, NY 14627-0158
United States
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Kenneth L. Sokoloff

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States
310-825-4249,310-825-1011 (Phone)
310-825-9528 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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