Inequality, institution and differential paths of growth among New World economies

Engerman, Stanley L.; Haber, Stephen; Sokoloff, Kenneth L.

doi:10.4337/9781781952764.00022

“…As pointed out by Sokoloff and Engerman (2000), Engerman, Haber and Sokoloff (2000) and Engerman and Sokoloff (2002), although many parts of the Caribbean and South America have formally been democracies, they lacked secrecy in balloting and had both wealth and literacy requirements for voting. In addition, there has been an extreme inequality in land holding and human capital.…”

Section: Oligarchic Structures and Human Capitalmentioning

confidence: 99%

“…As argued in more detail at the end of the paper, focussing on the case of New World economies, our basic mechanism is well-supported by empirical evidence. First, there has been a substantial degree of inequality in the distribution of political power in many Southern New World economies towards big landowners at least until the beginning of the 20th century (e.g., Sokoloff and Engerman, 2000;Engerman, Haber and Sokoloff, 2000;Engerman and Sokoloff, 2002), related to a failure to introduce an effective education system (Reimers, 2004). Second, there is overwhelming evidence that -thanks to dramatically falling transport costs and support by trade policy -commodity markets have become highly integrated in the late 19th century.…”

mentioning

confidence: 99%

Institutions and Development: The Interaction Between Trade Regime and Political System

Falkinger

¹

,

Grossmann

²

2005

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper argues that openness to goods trade in combination with an unequal distribution of political power has been a major determinant of the comparatively slow development of resource-or land-abundant regions like South America and the Caribbean in the nineteenth century. We develop a two-sector general equilibrium model with a tax-financed public sector, and show that in a feudal society (dominated by landed elites) productivity-enhancing public investments like the provision of schooling are typically lower in an open than in a closed economy. Moreover, we find that, under openness to trade, development is faster in a democratic system. We also endogenize the trade regime and demonstrate that, in political equilibrium, a land-abundant and landowner-dominated economy supports openness to trade. Finally, we discuss empirical evidence which strongly supports our basic hypotheses. Terms of use: Documents inJEL Code: F43, H50, N10, N16, O10.

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“…Figure 3 illustrates these channels to financial backwardness. Moreover, the current weakness of a polity's stabilizing institutions could be due to severe historical inequality having prevented politically stable institutions, in a way similar to how Engerman, Haber, and Sokoloff (2000) show that poor institutions developed in New World economies that were based on exploitive, plantation-style labor. (This could be illustrated by adding an input to the left of the (contemporary) Political Instability/Weak Stabilizing Institutions box in Figure 3, one for historically destabilizing institutions.)…”

Section: E Interactions With Other Existing Theoriesmentioning

confidence: 99%

Political instability: Effects on financial development, roots in the severity of economic inequality

Roe

¹

,

Siegel²

2011

Journal of Comparative Economics

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“…Auty (1997); Woolcook et al (2001); Isham et al (2005). Related arguments stressing differences in resource types are made in Sokoloff and Engerman (1997), Leite and Weidmann (1999) and Ross (1999).. Sachs and Warner (2001), on the other hand, argue that the distinction is not very important.…”

mentioning

confidence: 99%

The Resource Curse and its Potential Reversal

Boschini

¹

,

Pettersson

²

,

Roine

³

2013

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. -2005-329) is gratefully acknowledged. We also thank seminar participants at the DEGIT XIII conference (Manila, 2008). Terms of use: Documents in

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Inequality, institution and differential paths of growth among New World economies

Cited by 87 publications

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Institutions and Development: The Interaction Between Trade Regime and Political System

Institutions and Development: The Interaction Between Trade Regime and Political System

Political instability: Effects on financial development, roots in the severity of economic inequality

The Resource Curse and its Potential Reversal

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