The European Origins of Economic Development

50 Pages Posted: 16 Jun 2012 Last revised: 16 Feb 2023

See all articles by William Easterly

William Easterly

New York University - Department of Economics

Ross Levine

Stanford University; National Bureau of Economic Research (NBER)

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Date Written: June 2012

Abstract

Although a large literature argues that European settlement outside of Europe shaped institutional, educational, technological, cultural, and economic outcomes, researchers have been unable to directly assess these predictions because of an absence of data on colonial European settlement. In this paper, we construct a new database on the European share of the population during colonization and examine its association with the level of economic development today. We find: (1) a strong and uniformly positive relationship between colonial European settlement and development, (2) a stronger relationship between colonial European settlement and economic development today than between development today and the proportion of the population of European descent today; and (3) no evidence that the positive relationship between colonial European settlement and economic development diminishes or becomes negative at very low levels of colonial European settlement, contradicting a large literature that focuses on the enduring adverse effects of small European settlements creating extractive institutions. The most plausible explanation of our findings is that any adverse effect of extractive institutions associated with minority European settlement was more than offset by other things the European settlers brought with them, such as human capital and technology.

Suggested Citation

Easterly, William and Levine, Ross, The European Origins of Economic Development (June 2012). NBER Working Paper No. w18162, Available at SSRN: https://ssrn.com/abstract=2085149

William Easterly (Contact Author)

New York University - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

Ross Levine

Stanford University ( email )

Stanford, CA 94305
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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