Acemoglu, Johnson & Robinson (2001) — The Colonial Origins of Comparative Development

Citation. Acemoglu, Daron, Simon Johnson, and James A. Robinson. “The Colonial Origins of Comparative Development: An Empirical Investigation.” American Economic Review 91(5), 2001: 1369–1401.

Summary

The single most-cited paper in modern institutional economic history. AJR argue that long-run cross-country differences in income per capita are caused by differences in institutions, and that the historical mechanism producing those institutional differences is colonial: in regions where European settlers could survive (Australia, New Zealand, Canada, the United States), they established “inclusive” institutions that protected property rights and constrained the executive; in regions where settlers died at high rates from tropical disease (much of sub-Saharan Africa, the Caribbean, Bengal, Bolivia), Europeans established “extractive” institutions designed to transfer resources to a small ruling group, with no constraint on the executive.

The paper’s methodological innovation is the use of European settler mortality (16th–19th centuries) as an instrumental variable for current institutional quality. Because settler mortality plausibly affects current development only through its effect on the institutions Europeans set up — and not, e.g., through current health conditions in the colonized country — the instrument permits causal identification of institutions’ effect on income per capita. Their headline result: a one-standard-deviation improvement in institutions raises per-capita income by roughly a factor of 7.

The paper has been the foundation of one of the most active and contested research programs in development economics. Subsequent papers (AJR 2002 “Reversal of Fortune”; Acemoglu & Robinson’s Why Nations Fail) extend the framework. Critics (notably David Albouy 2012) have challenged the settler-mortality data, arguing that recoding the variable changes the results substantially. The empirical case is more contested in the 2020s than it appeared in the 2000s; the framework remains immensely influential.

Key claims

• Long-run cross-country income differences are causally explained by institutional quality, not by geography or culture.
• The historical mechanism is colonial: European settler-mortality determined whether Europeans set up inclusive (settler-friendly) or extractive (resource-extraction-focused) institutions.
• Institutions persist across centuries: the colonial-era institutional choice still substantially explains current income.
• Using settler mortality as an instrumental variable, the causal effect of institutions on income is large: roughly a factor-of-7 effect from a one-standard-deviation institutional improvement.
• This empirical strategy demonstrates that institutional explanations of development are not just plausible storytelling but are quantitatively identifiable.