The Importance Of European Colonialism

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Register to read the introduction… On one hand, prosperous and densely populated areas provided labor supply for agricultural work, which made extraction institutions more desirable, simply because there was more to be extracted. On the other hand, as Acemoglu, Johnson and Robinson point out, colonialists developed private property institutions in places where they settled in large number, “for the natural reason that they themselves were affected by these institutions.” (2002) The indirect role of geography here is that Europeans settled in sparsely populated areas more easily, where they could escape malaria, which was present in areas with high population. In the places where Europeans did not settle and cared little about equality and the welfare of the citizens, there was a large population and labor supply that could be used in agriculture and mining and there were resources to be extracted, Europeans created extractive institutions. On the contrary, in the areas, where most of the land was empty and lacked endemic diseases, Europeans settled in large numbers and developed laws to ensure their own protection and commerce …show more content…
Only after different institutions were introduced in different areas of the New World, did the incomes of countries start to diverge. Geography played only an indirect role by affecting the choice of economic policy and institutions.
Economists Rodrik, Subramanian and Trebbi reach the conclusion that “the quality of institutions trumps everything else.” (RST 2002) They demonstrate that once institutions are controlled for, geography has insignificant effect on economic prosperity. Easterly and Levine also support the evidence provided by Acemoglu, Johnson and Robinson, and Engerman and Sokoloff. They state that “measures of tropics, germs, and crops explain cross country differences in economic development through their impact on institutions.” (Easterly and Levine

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