The Colonial Origins of Comparative Development: An Empirical Investigation: Comment

Acemoglu, Johnson, and Robinson (2001) (hereafter, AJR) is a seminal article that has reinvigorated debate over the relationship between property rights and economic growth. Following Knack and Keefer (1995), Mauro (1995), La Porta et al. (1998), Hall and Jones (1999), Rodrik (1999), and others, AJR endeavors to determine the causal effect of institutions that protect property rights, measured by risk of capital expropriation, on economic performance. This endeavor is complicated by the fact that the correlation between institutional and economic measures may reflect the reverse influence of economic growth on institutions or the simultaneous influence of omitted variables on both economic output and institutions. To circumvent these problems, AJR uses an instrumental variable (IV) for expropriation risk in an equation determining GDP per capita across previously colonized countries. AJR argues that during the colonial era, Europeans were more likely to settle in places where they had a lower risk of dying from disease. Colonies where Europeans settled developed institutions that protect property better than colonies where Europeans did not settle. The article argues that, in the long run, the direct effects of mortality and European settlement on national income faded, while the indirect effect through property-rights institutions persisted. This argument motivates the use of potential European settler mortality rates as an instrument for the risk of capital expropriation. The AJR IV estimates of the effect of expropriation risk on GDP per capita are large, explaining much of the variation in income across countries. The historical sources containing information on mortality rates during colonial times are thin, which makes constructing a series of potential European settler mortality rates challenging. AJR constructs this series by combining the mortality rates of soldiers (Curtin 1989, 1998), laborers (Curtin et al. 1995), and bishops (Gutierrez 1986) from different time periods, mostly prior to the twentieth century. Researchers have been eager to use this new series, particularly given its promise as an instrumental variable for institutions. Currently, over 20 published articles, and many more working papers, use the AJR settler mortality data in their econometric analyses. The Colonial Origins of Comparative Development: An Empirical Investigation: Comment