Economic growth and economic development 208

Introduction to Modern Economic Growth
variety of evidence suggesting that the major effect of European settler mortality is
through institutions.
In particular, Acemoglu, Johnson and Robinson (2001) argue that:
(1) There were different types of colonization policies which created different
sets of institutions. At one extreme, European powers set up “extractive
states”, exemplified by the Belgian colonization of the Congo. These institutions did not introduce much protection for private property, nor did
they provide checks and balances against government expropriation. At
the other extreme, many Europeans migrated and settled in a number of
colonies. The settlers in many areas tried to replicate European institutions,
with strong emphasis on private property and checks against government
power. Primary examples of this include Australia, New Zealand, Canada,
and the United States.
(2) The colonization strategy was influenced by the feasibility of settlements.
In places where the disease environment was not favorable to European
settlement, extractive policies were more likely.
(3) The colonial state and institutions persisted to some degree and make it
more likely that former European colonies that suffered extractive colonization have worse institutions today.
Summarizing schematically, the argument is:
(potential) settler
early
current
current
⇒ settlements ⇒
⇒
⇒
mortality
institutions
institutions
performance
Based on these three premises, Acemoglu, Johnson and Robinson (2001) use

the mortality rates expected by the first European settlers in the colonies as an
instrument for current institutions in the sample of former European colonies. Their
instrumental-variables estimates show a large and robust effect of institutions on
economic growth and income per capita. Figures 4.11 and 4.12 provide an overview
of the evidence. Figure 4.11 shows the cross-sectional relationship between income
per capita and the measure of economic institutions we encountered in Figure 4.1,
protection against expropriation risk. It shows a very strong relationship between
the historical mortality risk faced by Europeans and the current extent to which
property rights are enforced. A bivariate regression has an R2 of 0.26. It also
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