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Banerjee et al. (2002) Property Rights (1) richer countries may be able to afford better institutions (2) may be many omitted determinants of income differences which are correlated with institutions solution – find instruments for institutions – needs to be an impor- tant factor in accounting for institutional variation we observe but should exert direct effect on economic performance - have data on mortality rates faced by soldiers, bishops and sailors in the 17th, 18th and 19th centuries – based on work of Philip Curtin – annualized deaths per thousand mean strength idea : use settler mortality M i as instrument for R i (potential) settler mortality settlements early institutions current institutions
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Unformatted text preview: ⇒ current performance • ±ind 2SLS estimates which are larger than OLS estimates- IV procedure depends on assumption that settler mortality in the past has no direct effect on economic performance- Authors Fnd result is robust to including variables for colonial ori-gin, legal origin, religion, disease, geography • institutions matter! • drawbacks (i) institutions treated like black box ⇒ results have limited direct policy relevance (ii) not clear why conditions which caused high historical settler mortality might (e.g. mangrove swamps full of mosquitoes) might not still exert an effect on growth Development Economics, LSE Summer School 2007 71...
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