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The Role of Institutions

Many factors including geographic ecological and

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Unformatted text preview: that are otherwise similar suddenly experienced some sort of shock. Key assumption: the “shock” should be unanticipated and random Basic idea; Want comparison countries to be as similar as possible at t=0 Then some exogenous shock randomly affects some but not others If geography has a causal effect on growth, then the shock should influence development at t+n than geographic location European colonization After the discovery of the new world and the rounding of the cape of good hope, Europeans dominated many previously diverse societies and fundamentally affected their social organizations (institutions) Does this approximate a NATURAL EXPERIMENT? Many factors, including geographic, ecological, and climactic ones are all constant But big changes in institutions Analogous to a real experiment where similar subjects have different “treatments” How to measure early GDP? Need a measure of prosperity before the modern era (don’t have GDP per capita) Substitute or PROXY variable: urbanization Only societies with agricultural surplus and good transportation...
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