Colonization: Regression Analysis and State History

DETERMINANTS AND ECONOMIC CONSEQUENCES OF COLONIZATION: A GLOBAL ANALYSIS
Arhan S. Ertan, Louis Putterman

Abstract Existing research in the area of economic growth suggests that the era of colonization has had an impact upon the modern levels of economic development of countries around the globe. However, why some countries were colonized early, some late, and others not at all, and what effect these differences have on current national income, has not been studied systematically. In the first part of this paper, we show that both the occurrence and timing of colonization can be explained by (a) differences in levels of pre-1500 development associated with different dates of transition to agriculture (Neolithic revolution) and with the associated history of state-level polities, (b) geographic proximity to the colonizing powers, and (c) the disease environment faced by the colonizers. In the second part, we analyze the developmental consequences of colonization taking the endogeneity of colonizations occurrence and timing into account. We find evidence that history of colonization does not have a direct affect on recent levels of income and recent rates of economic growth. But we also find that the share of the population that migrated from the places of greater pre-modern development had a positive impact both on current level and growth rate of income and on the quality of institutions in the newly settled places. Thus we conclude that the positive effect of colonization on current development works largely through the impact on the quality of institutions of the pre-colonial development levels of the ancestors of current populations.

JEL Classification: O11, O13, O40, O57 Keywords: Colonization, Economic Growth, Institutions, Pre-Modern Development, Migration.

Determinants and Economic Consequences of Colonization: A Global Analysis
“The discovery of America and that of a passage to the East Indies by the Cape of Good Hope are the two greatest and most

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