Colonialism and Modern Income -- Islands as Natural Experiments

47 Pages Posted: 6 Oct 2006 Last revised: 14 Apr 2021

See all articles by James Feyrer

James Feyrer

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Bruce Sacerdote

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 2006

Abstract

Using a new database of islands throughout the Atlantic, Pacific and Indian Oceans we examine whether colonial origins affect modern economic outcomes. We argue that the nature of discovery and colonization of islands provides random variation in the length and type of colonial experience. We instrument for length of colonization using wind direction and wind speed. Wind patterns which mattered a great deal during the age of sail do not have a direct effect on GDP today, but do affect GDP via their historical impact on colonization. The number of years spent as a European colony is strongly positively related to the island's GDP per capita and negatively related to infant mortality. This basic relationship is also found to hold for a standard dataset of developing countries. We test whether this link is directly related to democratic institutions, trade, and the identity of the colonizing nation. While there is substantial variation in the history of democratic institutions across the islands, such variation does not predict income. Islands with significant export products during the colonial period are wealthier today, but this does not diminish the importance of colonial tenure. The timing of the colonial experience seems to matter. Time spent as a colony after 1700 is more beneficial to modern income than years before 1700, consistent with a change in the nature of colonial relationships over time.

Suggested Citation

Feyrer, James and Sacerdote, Bruce, Colonialism and Modern Income -- Islands as Natural Experiments (October 2006). NBER Working Paper No. w12546, Available at SSRN: https://ssrn.com/abstract=933591

James Feyrer (Contact Author)

Dartmouth College - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Bruce Sacerdote

Dartmouth College - Department of Economics ( email )

6106 Rockefeller Hall
Hanover, NH 03755
United States
603-646-2121 (Phone)
603-646-2122 (Fax)

National Bureau of Economic Research (NBER)

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United States

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