The European Origins of Economic Development

49 Pages Posted: 12 Jun 2012 Last revised: 21 Jul 2014

See all articles by William Easterly

William Easterly

New York University - Department of Economics

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: July 17, 2014

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: Institutions, Human Capital, Political Economy, Natural Resources

JEL Classification: O43, O1, P48, N5

Suggested Citation

Easterly, William and Levine, Ross Eric, The European Origins of Economic Development (July 17, 2014). Available at SSRN: https://ssrn.com/abstract=2083220 or http://dx.doi.org/10.2139/ssrn.2083220

William Easterly (Contact Author)

New York University - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

Ross Eric Levine

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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