In a recent paper, economists James Feyrer and Bruce Sacerdote have found the following: the longer time a small island state has been colonised, the richer it now is. And there is a reason why some have had a longer colonial experience than others: wind patterns. Islands located near routes in the prevailing winds made useful stopovers and were more easily revisited and colonised.
There is a growing literature on the colonial origins of present-day income disparities among former colonies. Possibly the most influential paper is that of Acemoglu, Johnson and Robinson (2002), who study a sample of 64 former colonies. They argue the following: colonies experienced different intensities of European settlement and the higher the intensity of settlement centuries ago, the richer a country is now. European settlers went in large numbers to North America and Australia, but in small numbers to sub-Saharan Africa. Why? Because diseases such as malaria and yellow fever were killing them fast in sub-Saharan Africa. So, while in Northern America, Australia and New Zealand, European settlers created ‘Neo-Europes’ by building schools, protecting property rights and ensuring checks against government power, in places such as the Congo, mere ‘extractive states’ were created with just enough settlers to ensure the transfer of wealth from the colonies to Europe. Prevalence of diseases some centuries ago, explains why some countries now lack the right institutions and lag behind.
Looking at a data set of 81 islands, Feyrer and Sacerdote’s result is similar in spirit: what mattered some centuries ago in an age of sail, namely wind direction and speed, has an impact on the lives of people today. The following table captures the positive relationship between the length a small island has stayed as a colony and (the log of) its GDP per head....
The problem with this relationship is causality. It could well be that European settlers chose to settle in the ‘best’ islands first (i.e. which had the highest potential for growth) and these islands are, not surprisingly, richer now. This would mean that colonial experience has nothing to do with current wealth. This possibility is however eliminated in the paper. Indeed, Feyrer and Sacerdote show that early settlement was not because these countries had the highest growth potential, but simply because they were ’stumbled upon’ more frequently. The following graph shows that islands that experience weak wind speed (east-west wind vector close to zero) spent less time as colonies, possibly because they were difficult to attain with sailboats. Islands that experience stronger east-to-west winds (negative east-west vector of wind) have stayed longer as colonies:
Not enough corruption?
At a recent talk, the speaker made the interesting observation that one of the problems in Bihar (one of India’s traditionally under-performing states) has been that it’s not corrupt enough. Following the famous “Fodder Scam” (buying lots of fodder for non-existent cattle), a signal was sent out that there should not be a whiff of corruption from projects in the state. The bureaucracy clamped down and for 15 years the best way to avoid accusations of corruption was to do absolutely nothing.
Resolving the Bangladesh paradox;
Not only has it scored at or near the bottom of Transparency International's corruption perception index, but Bangladesh also scores in the bottom quartile of many of the Worldwide Governance Indicators. Yet this same country has seen its per capita income rise by one percentage point every decade (it is now close to 5 percent). It has already achieved universal primary enrolment, and an equal number of girls and boys in secondary school. It is on track to reducing child mortality by two-thirds (relative to 1990 levels) by 2015. Finally, Bangladesh reduced poverty by eight percentage points in five years—a rate of poverty reduction that is twice as fast as India’s.
What can explain this apparent paradox? One response is that the data about Bangladesh’s development successes are inaccurate. This reminds me of a poster a colleague had in his office: “If the facts don’t fit the theory, change the facts”. But anyone who has studied or visited Bangladesh knows that the growth and dynamism of the place is real. Another response is that the governance indicators are mis-measured. True, alongside these indicators of high corruption is a vibrant free press, an active NGO community, and since 1991, democratic elections.
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1 comment:
"Yet this same country has seen its per capita income rise by one percentage point every decade (it is now close to 5 percent). "
WTF is wrong with economists that they seem incapable of the simplest understanding of units? I mean, they're always going on about how they're such mathematical studs. Maybe their students, notoriously confused about calculus concepts, would be less confused if their teachers not only understood the difference between lump sums and flows, but didn't use sloppy language every time they ever communicate?
The only way I can parse this sentence to make any sense is something along the lines of
"Yet this same country has seen its per capita income GROWTH RATE rise by one percentage point PER ANNUM every decade (it is now close to 5 percent PER ANNUM). "
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