Colonisation, Institutions and Development: New Evidence

This article analyses current attempts to identify the factors underlying long-term economic growth. The author criticises some of the arguments and historical evidence on which the two main explanations that dominate recent literature are based: the institutional approach and the approach focusing on the importance of geographical factors. Using an approach which is deliberately eclectic, the author considers the role of geography, international trade, human capital and institutional quality in explaining development. A new estimation is carried out through Two Stages Least Squares (TSLS) with instrumental variables. The results of the empirical model confirm the central role of institutions in long-term economic growth. However, certain geographical conditions also seem to have influenced countries' chances of progress. The human capital is a less robust factor in explaining economic growth and trade openness does not seem significant in any estimation. Nevertheless, several questions remain to be answered, suggesting that cross-country estimations need to be complemented with a deeper historical analysis.