Europeans and economic growth

A new NBER paper by Bill Easterly and Ross Levine proposes that a large proportion of global development is attributable to European settlement, even where Europeans formed a small minority of the population. The abstract:

A large literature suggests that European settlement outside of Europe shaped institutional, educational, technological, cultural, and economic outcomes. This literature has had a serious gap: no direct measure of colonial European settlement. In this paper, we (1) construct a new database on the European share of the population during the early stages of colonization and (2) examine its impact on the level of economic development today. We find a remarkably strong impact of colonial European settlement on development. According to one illustrative exercise, 47 percent of average global development levels today are attributable to Europeans. One of our most surprising findings is the positive effect of even a small minority European population during the colonial period on per capita income today, contradicting traditional and recent views. There is some evidence for an institutional channel, but our findings are most consistent with human capital playing a central role in the way that colonial European settlement affects development today.

The authors are agnostic on the reason for the relationship:

[W]e do not identify a single mechanism through which the European share of the population during colonization shaped long-run economic development. We show that European share is strongly associated with human capital and democratic political institutions today, but we do not trace the impact of Europeans on human capital and political institutions over time, nor do we exclude other potential mechanisms through which the European share of the population during colonization might influence economic development.

How does the proposal in this paper fit with Easterly’s usual skepticism about what the West can do for the rest of the world?

I will write a longer post on the paper when I have given it some more attention.

HT Nicholas Gruen

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