Settler Mortality & Economic Outcomes

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Extractive vs. Neo-European Institutions

The theory explored here, prominently discussed by Acemoglu, Johnson, and Robinson (2001), suggests that the conditions European colonizers faced, particularly settler mortality rates, significantly influenced the types of institutions they established. These institutions, in turn, had long-lasting impacts on economic development.

Extractive Institutions: In colonies where settler mortality rates were high (e.g., due to tropical diseases), it was difficult for Europeans to settle permanently in large numbers. In such places, colonial powers often established extractive institutions. These were designed to extract maximum resources (minerals, agricultural products, labor) for the benefit of the colonizing country with minimal investment in local development. Characteristics include:

• Limited or no protection of private property for the majority.
• Forced labor systems.
• Lack of political rights and participation for the indigenous population.
• Legal systems that favored the colonizers.

These institutions prioritized short-term gains for the colonizers and often persisted in various forms after independence, hindering long-term, broad-based economic growth.

Neo-European (or Inclusive) Institutions: In colonies where settler mortality rates were low, Europeans could settle in large numbers and aimed to replicate the institutions of their home countries. These are often termed neo-European or institutions of private property (more broadly, inclusive institutions). Characteristics include:

• Secure property rights for a broad segment of the population.
• Enforcement of contracts.
• Checks and balances on government power.
• Broader access to education and economic opportunities.

These institutions are argued to have fostered investment, innovation, and long-term economic prosperity by creating a more level playing field and incentives for productive activities.

The Link: The core idea is that initial settler mortality rates were a key determinant of the type of early colonial institutions. Extractive institutions set countries on a path of low economic development and high inequality, while inclusive institutions set a path towards greater prosperity. Therefore, a common finding is that higher historical settler mortality is correlated with lower current GDP per capita, primarily through the mediating effect of these long-lasting institutional frameworks.