Determinants of afriican income per capita differences

* Different colonization policies in different colonies..so different associated institutions.
* In places where Europeans faced high mortality rates:
* they could not settle so they set up extractive institutions.
* Institutions persisted to the present
* Better institution mean:
* More secure property rights and less distortionary policies that invest more inphysical/human capital., and will use these factor more efficiently to achieve a greater level of income.
* Importance of institutions.
* Examples. N/S. Korea, E/W. Germany
* 3 premises:
* 1) Different types of colonization policies lead to different kinds of institutions.
* Extractive states. Congo, Sierra Leona.
* Neo-Europes. Australia, U.S, Canada.* 2) Colonization strategy was influenced by the feasibility of settlements.
* 3) Colonial state and institutions persisted even after independence. What leads to institutional persistance?
* Main instrument for current institutions:
* Mortality rates expected by first Europeans.
* Theory schema:
* (potential) settler mortality settlements early institutionscurrent institutions current performance.
* Key instrument: Mortality rates of settlers.
* Remember: we use this instrument because it affects institutions and institutions have a large effect in the economic performance.
* Settlers mortality is a plausible instrument:
* Diseases affected European settlements and the types of institutions they set up.Extractive or Neo-European.
* Data: Philip Curtin military medical record.
* Gap for South America. Spanish, Portuguese no good records.
* Figure 1.
* Log GDP per capita against log settler mortality.(75 count.)
* Strong negative relationship.
* Colonies that faced high mortality rates are now poorer than colonies that were healthy for Europeans.* Because of this. Our theory says that the relationship reflects the effect of settler mortality in economic performance working through institutions.
* Instrument for institutions:
* Protection against “risk of expropiation”
* Index from Political Risk Services as proxy for institutions.
* Variable measures differences in institutions originating different typesof states and state policies
* Trough our hypothesis:
* Strong relationship between settler mortality and current institutions.
* Mortality 100 years ago explains 25% of variation of current institutions
* Obvious: Mortality rates have no effect on GDP p.c today other than the effect through institutional developments.

* Because of this. Ourtheory says that the relationship reflects the effect of settler mortality in economic performance working through institutions.
* Instrument for institutions:
* Protection against “risk of expropiation”
* Index from Political Risk Services as proxy for institutions.
* Variable measures differences in institutions originating different types of states and state policies* Trough our hypothesis:
* Strong relationship between settler mortality and current institutions.
* Mortality 100 years ago explains 25% of variation of current institutions
* Obvious: Mortality rates have no effect on GDP p.c today other than the effect through institutional developments.
* Key variables of interest. 64 countries.
*Measurement of economic outcome: Income GDP p.c.
* Institutional differences: Index of protection against risk expropiation.
* Measurement of early institutions: constraint on executive 1900, Index of democracy 1900, Deviation of constraint 1st year of independence, population of European descent.
* Final row: log of settlers mortality stimates. Curtin data.
* Columns:...