¹ North, Douglass C., Structure and Change in Economic History (New York: W. W. Norton, 1981)Google Scholar; North, Douglass C., Institutions, Institutional Change, and Economic Performance (Cambridge: Cambridge University Press, 1990)CrossRefGoogle Scholar.

² Prominent examples include Knack, Stephen and Keefer, Philip, ‘Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures’, Economics and Politics, 7 (1995), 207–227CrossRefGoogle Scholar; Sachs, Jeffrey D. and Warner, Andrew M., ‘Fundamental Sources of Long-Run Growth’, American Economic Review, 87 (1997), 184–188Google Scholar; and William Easterly and Ross Levine, ‘Tropics, Germs, and Crops: How Endowments Influence Economic Development’, Journal of Monetary Economics, 50 (2003), 3–39CrossRefGoogle Scholar.

³ See, for instance, Chong, Alberto and Calderón, César, ‘Causality and Feedback between Institutional Measures and Economic Growth’, Economics and Politics, 12 (2000), 69–81CrossRefGoogle Scholar.

⁴ Acemoglu, Daron, Johnson, Simon and Robinson, James A., ‘The Colonial Origins of Comparative Development: An Empirical Investigation’, American Economic Review, 91 (2001), 1369–1401CrossRefGoogle Scholar; Acemoglu, Daron, Johnson, Simon and Robinson, James A., ‘Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution’, Quarterly Journal of Economics, 117 (2002), 1231–1294CrossRefGoogle Scholar. Hereafter, we refer to these authors collectively as AJR and the two articles as ‘AJR (2001)’ and ‘AJR (2002)’, respectively.

⁵ This phrase is the subtitle of AJR (2002).

⁶ This citation figure is from the Web of Science database. Other citation trackers provide an even more impressive figure; Google Scholar lists 3,536 citations to AJR (2001). Both figures are accurate as of 18 March 2010.

⁷ Albouy, David, ‘The Colonial Origins of Comparative Development: An Investigation of the Settler Mortality Data’, NBER Working Paper No. 14130 (2008)Google Scholar; Acemoglu, Daron, Johnson, Simon and Robinson, James A., ‘Reply to the Revised (May 2006) version of David Albouy’s “The Colonial Origins of Comparative Development: An Investigation of the Settler Mortality Data” ’ (unpublished manuscript (2006) available from http://econ-www.mit.edu/faculty/acemoglu/paper).Google Scholar

⁸ For instance, Easterly and Levine, ‘Tropics, Germs, and Crops’; Rodrik, Dani, Subramanian, Arvind and Trebbi, Francesco, ‘Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development’, Journal of Economic Growth, 9 (2004), 131–165CrossRefGoogle Scholar; Acemoglu, Daron, Johnson, Simon and Robinson, James A., ‘Institutions as the Fundamental Cause of Long-Run Growth’, in Philippe Aghion and Steven N. Durlauf, eds, Handbook of Economic Growth, Vol. 1A (Amsterdam: Elsevier, 2005), pp. 385–472Google Scholar.

⁹ All variables are taken from AJR’s (2001, 2002) published data appendices, including the authors’ working paper – Acemoglu, Daron, Johnson, Simon and Robinson, James A., ‘The Colonial Origins of Comparative Development: An Empirical Investigation’, NBER Working Paper No. 7771 (2000)Google Scholar.

¹⁰ See, for example, Glaeser, Edward L., La Porta, Rafael, Lopez-De-Silanes, Florencio and Shleifer, Andrei, ‘Do Institutions Cause Growth?’ Journal of Economic Growth, 9 (2004), 271–303CrossRefGoogle Scholar; Olsson, Ola and Hibbs, Douglass A., ‘Biogeography and Long-Run Economic Development’, European Economic Review, 49 (2005), 909–938CrossRefGoogle Scholar.

¹¹ For a similar argument, see Engerman, Stanley E. and Sokoloff, Kenneth L., ‘Factor Endowments, Inequality, and Paths of Development among New World Economies’, Economia, 3 (2002), 41–88Google Scholar.

¹² AJR do devote a paragraph (2001, p. 1375) to ‘the most extreme case of extraction’, namely the Congo. We concur that the historical literature confirms that the Congo represents an extreme case, but AJR make no general case that there is systematic variation in exploitation beyond the four British clones. Indeed, it is noteworthy that their three ‘extreme’ cases of good colonialism (2001, p. 1395) are supported by substantial historical studies, whereas their two ‘extreme’ cases of bad colonialism rest solely on the Congolese case, with a fleeting reference to the Gold Coast (2001, pp. 1375 and 1395).

¹³ See AJR (2000) for data on settlement in Africa and Latin America. Note that twenty-eight of the forty African cases are coded as having zero European settlement, and that most of the remaining African cases are close to zero in comparison with the Latin American values.

¹⁴ Sokoloff, Kenneth L. and Engerman, Stanley R., ‘History Lessons: Institutions, Factor Endowments, and Paths of Development in the New World’, Journal of Economic Perspectives, 14 (2000), 217–232CrossRefGoogle Scholar.

¹⁵ Sokoloff and Engerman, ‘History Lessons’, p. 230, emphasis added. Sokoloff and co-authors examine a wider set of institutions than AJR, noting that the European settler elite in Latin America not only set up perverse property rights but also perverse systems of education, suffrage and taxation. See Engerman and Sokoloff, ‘Factor Endowments’; Engerman, Stanley R. and Sokoloff, Kenneth L., ‘The Evolution of Suffrage Institutions in the New World’, Journal of Economic History, 65 (2005), 891–921CrossRefGoogle Scholar; Sokoloff, Kenneth L. and Zolt, Eric M., ‘Inequality and the Evolution of Institutions of Taxation: Evidence from the Economic History of the Americas’, in Sebastian Edwards, Gerardo Esquivel and Graciela Marquez, eds, The Decline of Latin American Economies: Growth, Institutions, and Crises (Chicago: University of Chicago Press, 2007), pp. 83–136CrossRefGoogle Scholar.

¹⁶ It is well known that Latin America’s inequality is the world’s highest (e.g., Engerman, and Sokoloff, , ‘Evolution of Suffrage’, p. 894)Google Scholar.

¹⁷ This later quote is originally from Denoon, Donald, Settler Capitalism: The Dynamics of Dependent Development in the Southern Hemisphere (Oxford: Clarendon Press, 1983), p. 35Google Scholar.

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¹⁹ On institutions, see La Porta, Rafael, Lopez-de-Silanes, Florencio, Shleifer, Andrei and Vishny, Robert, ‘The Quality of Government’, Journal of Law, Economics, and Organization, 15 (1999), 222–282CrossRefGoogle Scholar. On human capital, see Brown, David S., ‘Democracy, Colonization, and Human Capital in Sub-Saharan Africa’, Studies in Comparative International Development, 35 (2000), 2–40CrossRefGoogle Scholar; Grier, Robin M., ‘Colonial Legacies and Economic Growth’, Public Choice, 98 (1999), 317–335CrossRefGoogle Scholar. For economic growth, see Bertocchi, Graziella and Canova, Fabio, ‘Did Colonization Matter for Growth? An Empirical Exploration into the Historical Causes of Africa’s Underdevelopment’, European Economic Review, 46 (2002), 1851–1871CrossRefGoogle Scholar.

²⁰ Lange, Matthew K., Mahoney, James and vom Hau, Matthias, ‘Colonialism and Development: A Comparative Analysis of British and Spanish Colonies’, American Journal of Sociology, 111 (2006), 1412–1462CrossRefGoogle Scholar. The authors focus on the ‘level of colonialism’, (p. 1414) representing the degree to which the colonizing power establishes political, economic and sociocultural institutions in a colonial territory. However, the authors recognize that settlement is the primary mode by which institutions are transferred.

²¹ See the ‘Analysis’ section below for a detailed discussion of the specific variables.

²² In Spanish colonies, intermediate levels of European settlement did exist, mostly in Latin America. As argued above, however, the existing literature suggests that Spanish settlement had either a weaker positive effect than British settlement, or perhaps even a negative effect. We, therefore, focus exclusively on British settlement.

²³ On the phrase ‘Neo-Europe’, see Crosby, Alfred, Ecological Imperialism: The Biological Expansion of Europe, 900–1900 (Cambridge: Cambridge University Press, 1986)Google Scholar; Acemoglu, , Johnson, and Robinson, , ‘Colonial Origins’, p. 1370Google Scholar. Canada is a partial exception to the term ‘Neo-Britain’ in that the province of Quebec is of French descent, but the other twelve provinces and territories are overwhelmingly of British descent. Following independence, the United States received substantial immigration from other European countries, but economic historians emphasize the importance of founding political and economic institutions, and these were determined by the British. See Denoon, Settler Capitalism.

²⁴ These results are available from the authors. Note that AJR’s (2001) two-stage least-squares (2SLS) analyses, which we replicate below, use a base sample size of sixty-four observations. Malta, which is included in these later exercises, does not have data on the settlement variable, accounting for the difference here of a single observation.

²⁵ For a related argument in favour of out-of-sample tests, which are accomplished by evaluating an argument beyond the inductive cases used to generate that theory in the first place, see Ross, Michael, ‘Testing Inductively-Generated Hypotheses with Independent Data Sets’, APSA CP-Newsletter, 14 (2003), 14–17Google Scholar.

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²⁹ Vreeland, Nena, Dana, Glenn B., Hurwitz, Geoffrey B., Just, Peter and Shinn, R. S., Area Handbook for Singapore (Washington, D.C.: Foreign Area Studies Government Documents, 1977), p. 42Google Scholar.

³⁰ See, for instance, Vaughan Roberts, Elfed, Ngai Ling, Sum and Bradshaw, Peter, Historical Dictionary of Hong Kong and Macau (Metuchen, N.J.: The Scarecrow Press, 1992), pp. xxiv–xxvGoogle Scholar; Ryan, N. J., A History of Malaysia and Singapore (London: Oxford University Press, 1976)Google Scholar; Leitch LePoer, Barbara, ‘Chapter 1: Historical Setting’, in Barbara Leitch LePoer, ed., Singapore: A Country-Study (Washington, D.C.: Federal Research Division, Library of Congress, 1991), pp.1–64Google Scholar; Fu-Lai Yu, Tony, Entrepreneurship and Economic Development in Hong Kong (London: Routledge, 1997)Google Scholar.

³¹ Figures reported in World Bank, World Development Indicators (Washington, D.C.: The World Bank, 2008), pp. 320–382Google Scholar.

³² La Porta et al., ‘Quality of Government’. Our Appendix A provides a complete description of the data sources and samples employed. Appendix B (discussed below) contains a number of supplementary tables. Both appendices are available with the Journal’s website version of this article, published by Cambridge University Press, 2010, doi:10.1017/S0007123410000141, as well as on the authors’ personal websites.

³³ These data are derived from subjective indicators of the risk of expropriation, and are taken from AJR’s (2001) published data appendix. In some empirical analyses AJR also measure property rights institutions with the Polity component ‘Constraints on the Executive’, which is commonly used as a measure of democracy. However, prior research has made clear that democracy and property rights are not synonymous and should not be used as proxies of one another, and thus we use the more commonly accepted indicator of expropriation risk. On this later point, see Przeworski, Adam and Limongi, Fernando, ‘Political Regimes and Economic Growth’, Journal of Economic Perspectives, 7 (1993), 51–69CrossRefGoogle Scholar.

³⁴ In later work, AJR provide the equivalent of Panels A and B, but they do not comment on the fact that the four Neo-Britains entirely drive the relationships. See ‘Institutions as the Fundamental Cause’.

³⁵ A discussion of the slight differences between our replications and the original published work can be found in Appendix A. AJR’s (2002) original Table 7 also includes a second panel that utilizes latitude as a control variable. We have replicated this specification as well and report the results in our Appendix B Table 3B. Note that the substantive conclusions we draw from that exercise are identical.

³⁶ Bardhan, Pranab, Scarcity, Conflicts, and Cooperation: Essays in the Political and Institutional Economics of Development (Cambridge, Mass.: MIT Press, 2005), p. 4Google Scholar.

³⁷ To be precise, the coefficients in columns 1–3 are close but not exact replications of AJR, as a result of some slight discrepancies in the underlying data, as discussed in Appendix A.

³⁸ We report in Table 4B (Appendix B) standard errors without clustering, and as such, that table is our closest possible replication of AJR’s original analyses, other than the slight data discrepancies noted in the preceding footnote.

³⁹ When two or more units share a single estimate, their error terms are not independently and identically distributed. Failure to correct for this lack of independence can result in biased standard errors, and clustering is a standard way of correcting for this problem. Albouy documents the need for clustering in AJR’s (2001) analysis, given that the sixty-four countries in the sample utilize only thirty-eight independent mortality estimates. Subsequent responses by AJR implicitly accept that clustered standard errors are well suited for the data. See Albouy, , ‘Colonial Origins’; Acemoglu, Johnson and Robinson, ‘Reply’Google Scholar.

⁴⁰ Bound, John, Jaeger, David A. and Baker, Regina M., ‘Problems with Instrumental Variable Estimation When the Correlation between the Instruments and the Endogenous Explanatory Variable is Weak’, Journal of the American Statistical Association, 90 (1995), 443–450Google Scholar; Zivot, Eric, Startz, Richard and Nelson, Charles R., ‘Valid Confidence Intervals and Inference in the Presence of Weak Instruments’, International Economic Review, 39 (1998), 1119–1143CrossRefGoogle Scholar.

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⁴² Kennedy, Peter, A Guide to Econometrics, 6th edn (Malden, Mass.: Blackwell Publishing, 2008), p. 141Google Scholar.

⁴³ Baum, Christopher F., Schaffer, Mark E. and Stillman, Steven, ‘Instrumental Variables and GMM: Estimation and Testing’, Stata Journal, 3 (2003), 1–31Google Scholar, p. 15; Staiger, Douglas and Stock, James H., ‘Instrumental Variables Regression with Weak Instruments’, Econometrica, 65 (1997), 557–586CrossRefGoogle Scholar; Kennedy, , A Guide to Econometrics, p. 145Google Scholar.

⁴⁴ For details, see Zivot et al., ‘Valid Confidence Intervals’; see also Chernozhukov, Victor and Hansen, Christian, ‘The Reduced Form: A Simple Approach to Inference with Weak Instruments’, Economics Letters, 100 (2008), 68–71CrossRefGoogle Scholar. For the use of Anderson–Rubin statistics in the context of clustering, see Albouy, , ‘Colonial Origins’, pp. 13–14Google Scholar.

⁴⁵ Specifically, our column 4 Table 4 is identical to Albouy’s column 3 Table 1 (panel A). He reports the widening second-stage confidence intervals in column 3 Table 2 (panel A), which we report in our column 4 Table 5. See Albouy, ‘Colonial Origins’, p. 13.

⁴⁶ This is one instance in which clustering does influence the results. As can be seen in Table 4b, column 6 of Appendix B, the instrument does (barely) pass a weak test of instrument relevance. As noted earlier, however, the standard errors can be biased without the cluster correction, and therefore Table 4 is preferable to Table 4b.

⁴⁷ ‘Institutions Rule’ is the title of Rodrik, Subramanian and Trebbi’s influential paper, see fn. 8.

⁴⁸ Chong and Calderón, ‘Causality and Feedback’; note that these authors use a composite measure of institutions from the International Country Risk Guide, whereas AJR utilize only the sub-component expropriation risk. Both variants are commonly used in the growth literature.

⁴⁹ Glaeser, et al. , ‘Do Institutions Cause Growth?’ p. 276Google Scholar.

⁵⁰ Easterly makes the more general point that political and social conditions in the developing world have improved over recent decades, and yet economic growth has dramatically slowed. See Easterly, William, ‘The Lost Decades: Developing Countries’ Stagnation in Spite of Policy Reform, 1980–1998’, Journal of Economic Growth, 6 (2001), 135–157CrossRefGoogle Scholar.

⁵¹ Glaeser, et al. , ‘Do Institutions Cause Growth?’ p. 274Google Scholar.

⁵² While colonialism was a central concern in the dependency literature of the 1970s and earlier 1980s, it was not particularly prominent in the late 1980s and 1990s. For an illustrative analysis with no historical variables, see Barro, Robert and Sala-i-Martin, Xavier, Economic Growth (New York: McGraw Hill, 1995)Google Scholar.

⁵³ If the four British clones are excluded, population density still accounts for roughly one-quarter of the variation in modern incomes (R ² = 0.24).

⁵⁴ For a recent review – and the source of this phrase – see Nunn, Nathan, ‘The Importance of History for Economic Development’, Annual Review of Economics, 1 (2009), 65–92CrossRefGoogle Scholar.

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