The Importance Of European Colonialism
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