Current differences in development between North and Latin American countries led to different academic approaches explaining this phenomenon. One thesis is the institutionalist approach with two popular theories brought up by Daron Acemoglu and Engermann and Sokoloff differing in their definition on institutions. Further research confirms these theories in parts depending on their empirical methodology.
My empirical work focusses on Engermann and Sokoloff, finding soft evidence for their claim of colonial activities influencing growth paths until today. I do not find evidence for colonial activities and slavery influencing modern income inequality.
Table of Contents
1. Introduction
2. The Institutionalist Approach – A Literature Overview
2.1. Engermann and Sokoloff – Economic and Political Inequality
2.2. Acemoglu – Property Rights
3. Empirical Work
4. Conclusion
5. References
6. Appendix
Objectives and Research Themes
This paper examines the institutionalist approach to explaining economic developmental disparities between North and Latin American countries. By analyzing the theoretical frameworks of Engermann & Sokoloff and Acemoglu, the study investigates how colonial legacies, specifically slavery and institutional development, influence contemporary economic outcomes and inequality.
- The institutionalist approach to economic development.
- Impact of colonial activities, slavery, and factor endowments on long-term growth.
- Comparative analysis of property rights and political/economic inequality as development channels.
- Empirical evaluation using subnational data from the Americas.
Excerpt from the Book
2.1. Engermann and Sokoloff – Economic and Political Inequality
The institutionalist approach by ES links the different growth paths of North and Latin America to the colonial activities the European conquerors engaged in when settling in the New World. In a series of papers (Engermann and Sokoloff, 1997, 2002, 2006) it is argued that different growth trajectories of American countries can be explained by different initial factor endowments, which in turn led to differences in production. To a large degree based on slavery or the exploitation of the indigenous population by the European colonizers, these differences caused enormous inequality, according to ES. Those regions in the New World endowed with climate and soil enabling the plantation of sugar and highly valued crops relied on a vast population of African slaves as large scale plantation and economies of scale demanded for high amounts of manual labor. For example, Brazil was the main recipient of African slaves as large scale plantation was particularly wide-spread in South America (Fujiwara et al., 2017). The intrinsic inequality of slavery enabled the creation of exclusive institutions that protected the privileges of the small elite restricting the rest of the society from fully participating in the economy. Due to these institutions, inequality became persistent over time even after the abolishment of slavery. The importance of factor endowments can also be seen in ES’ second type of colonies, which were rich on mineral resources and a large indigenous population. These colonies (mainly today’s Mexico and Peru) relied on the exploitation of their resources through mining and forcing the indigenous population to labor. Furthermore, colonizers adopted the pre-conquest social structures of tax and tribute. ES identify a couple of channels through which inequality became harmful for long-term growth.
Summary of Chapters
1. Introduction: Outlines the research focus on institutionalist approaches to economic disparities in the Americas and establishes the paper's methodological path.
2. The Institutionalist Approach – A Literature Overview: Provides a comprehensive discussion of the two primary institutionalist theories by Engermann & Sokoloff and Acemoglu, focusing on their respective definitions of institutions.
2.1. Engermann and Sokoloff – Economic and Political Inequality: Explores how initial factor endowments and colonial-era slavery fostered persistent institutional inequality.
2.2. Acemoglu – Property Rights: Analyzes the theory of institutional strategies based on settler mortality and the resulting impact on secure property rights.
3. Empirical Work: Presents the author's own regression analyses, building on Bruhn and Gallego (2012) while modifying the sample to focus specifically on Latin American dynamics.
4. Conclusion: Synthesizes the findings, noting that while institutionalist theories are partially confirmed, empirical results vary significantly based on statistical approaches and data scope.
5. References: Lists the academic sources and datasets used to support the analysis.
6. Appendix: Provides detailed empirical tables summarizing the regression results and colonial activity determinants.
Keywords
Latin America, Inequality, Slavery, Colonial Activity, Institutionalism, Economic Development, Property Rights, Factor Endowments, GDP per Capita, Political Participation, Subnational Analysis, Bruhn and Gallego, Engermann and Sokoloff, Acemoglu, Tordesillas line.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper evaluates the institutionalist approach to understanding why countries in the Americas have experienced such vastly different paths of economic development, specifically comparing North and Latin America.
What are the two main institutionalist theories discussed?
The study examines Engermann and Sokoloff's thesis regarding the impact of economic and political inequality, and Acemoglu's theory focusing on the role of secure property rights.
What is the core research question addressed in this work?
The work seeks to determine whether the channels proposed by institutionalist theories—such as slavery and resulting inequality—effectively explain contemporary developmental differences when subjected to subnational empirical testing.
Which scientific methodology does the author apply?
The author conducts an empirical analysis by replicating and expanding upon the regression models of Bruhn and Gallego (2012), modifying the sample to exclude North American countries to isolate Latin American effects.
What are the key topics covered in the main body?
The main body covers the theoretical foundations of the institutionalist approach, a review of relevant literature, an examination of historical colonial strategies, and a rigorous empirical regression analysis of subnational data.
Which keywords define this paper?
The research is characterized by terms such as Latin America, Inequality, Slavery, Colonial Activity, Institutionalism, and Reversal of Fortunes.
What does the author conclude regarding the 'reversal of fortunes' thesis?
The author notes that while the 'reversal of fortunes' is confirmed at the aggregate level in some literature, subnational findings suggest that other factors, such as agglomeration effects, often dominate.
Does the author find evidence for slavery causing modern income inequality?
In the empirical section, the author does not find a significant impact of colonial activities on income inequality, which stands in contrast to some other studies like those by Fujiwara et al.
How is political participation linked to the findings?
The regression shows that colonial activities correlate with political representation, suggesting that political inequality is a critical channel linking colonial history to current development outcomes.
Why are there discrepancies in empirical findings between different authors?
The author explains that discrepancies arise due to the use of different data sets, varying levels of analysis (aggregate vs. subnational), and distinct statistical methodologies like the usage of the Tordesillas line.
- Quote paper
- Thomas Craemer (Author), 2017, Inequality in the New World. Discussing the Institutionalist Approach, Munich, GRIN Verlag, https://www.grin.com/document/364580
