Initial Conditions , Institutional Dynamics and Economic Performance :

Using state-level data from the United States, we find that initial legal systems in territories originally settled by Great Britain – a common law country – and in territories originally settled by France, Spain, and Mexico and the Netherlands all civil law countries have persistent effects on the quality of contemporary institutions. In order to explain these findings, we develop a transplant-civil law hypothesis that highlights the disruption associated with large-scale legal transplantation and the relative inefficiencies of civil law. We also propose an initial mortality hypothesis emphasizing the importance of the initial disease environment. We find strong support for both hypotheses and reject the null that initial conditions do not matter for contemporary institutions. Our results are robust to inclusion of variables capturing geography, climate, initial population and resource endowments. We use initial legal systems and initial disease environment to quantify the substantial impact of current institutions on current economic performance. *We have benefited greatly from discussions with Vivian Curran, Stanley Engerman, Helen Hershkoff, Katharina Pistor, Yingyi Qian, James Robinson, Gerard Roland, Peter Shane, G. Alan Tarr, Chris Woodruff, and Gavin Wright.