Research Library

Culpepper, Pepper. 2002. “The Political Perils of Collaborative Governance in France and Italy.” Annual Meeting of the American Political Science Association. Boston.Abstract

When social scientists talk about the adoption of new governance arrangements in a given policy area, their questions are most often functional: What will those new arrangements do better than the previous way of making policy? Yet politicians do not always, or even usually, pick policy solutions because they offer the best functional answer to a policy problem. Instead, they adopt solutions at a given time that advance their electoral or partisan interests as well as responding to a perceived policy problem (cf. Kingdon 1984). Thus, they not only want to do things (provide child care, increase economic development), but to do things that are politically useful (fortify their local political machine, distribute benefits to political supporters).

It in this light that I evaluate in this paper two of the most significant innovations in collaborative governance arrangements in Europe in the 1990s. The first is the 1993 French reform that created regional–level multi–partite institutions to develop proposals for regional education and training initiatives that aimed to spur private investment in human capital. The second is the institution of territorial pacts as the cornerstone of Italian development policy in the 1990s. The development pacts were to sponsor the participation of local secondary associations and politicians in proposing territorial development plans, with the goal of promoting ongoing cooperation among these actors at the territorial level. These reforms are especially significant because they took place in two unitary states with weak regional governments and weak traditions of corporatist policy–making. They were innovative, at least in form, because they attempted to build institutions of public/private collaboration to provide collective goods at a local level. As such, they simultaneously marked an attempt to break radically with the nature of past policy and with the institutions through which those policies had been designed. These were not equivalent to sectoral neocorporatist policies practiced especially widely in northern Europe (Lehmbruch 1984) both by virtue of the scope of private actors involved and of the delegation of policy autonomy to these actors. In terms of scope, they attempted to involve a wide range of local stakeholders, rather than monopolistic employers and unions. And in terms of policy autonomy, these new instances were empowered not merely to implement policies decided at the center, but to develop their own analyses of local problems and proposed responses to them. They were not merely bodies of decentralized implementation, but of decentralized policy design, with the institutions for designing policy moved away from national politicians and to local actors (among which politicians were just one, if still the primus inter pares).

The actual institutions have, so far, shown themselves to be quite heterogeneous. In this paper, I first summarize their experiences?both their political origins and their successes and failures in fulfilling the institutional mandate delegated to them. After reviewing the major developments in each institutional experiment, I draw parallels between the two ongoing experiments, focusing in particular on the organizational prerequisites for their success and the dilemmas they pose for public actors who would attempt to expand collaborative governance arrangements.

Rodrik, Dani. 2002. “When Economic Reform Goes Wrong: Cashews in Mozambique”.Abstract

Mozambique liberalized its cashew sector in the early 1990s in response to pressure from the World Bank. Opponents of the reform have argued that the policy did little to benefit poor cashew farmers while bankrupting factories in urban areas. Using a welfare–theoretic framework, we analyze the available evidence and provide an accounting of the distributional and efficiency consequences of the reform. We estimate that the direct benefits from reducing restrictions on raw cashew exports were of the order $6.6 million annually, or about 0.14% of Mozambique GDP. However, these benefits were largely offset by the costs of unemployment in the urban areas. The net gain to farmers was probably no greater than $5.3 million, or $5.30 per year for the average cashew-growing household. Inadequate attention to economic structure and to political economy seems to account for these disappointing outcomes.

McTernan, Oliver. 2002. “Pious Words Won't Heal the Hurt”. Publisher's VersionAbstract

A former priest, Oliver McTernan, explains why American Catholics feel betrayed by the Church

The fact that Pope John Paul II has chosen to meet only cardinals today, many of whom are themselves subject to public criticism for their mishandling of the sex abuse scandals traumatising the American Roman Catholic Church, highlights one of the real issues at the centre of this crisis.

The absence of victims, laity and priests, all of whom have been affected by the unfolding scandal, suggests that, for the Vatican, this meeting is no more than a crisis-management session aimed at damage limitation and deflecting further criticism at its moral ineptness to deal with a serious problem that has beleaguered the Catholic Church globally for decades.

If Vatican officials believe that a few pious exhortations and a new set of policy guidelines on how to handle future child-abusing clerics will allow the Church to continue with its existing style of governance, they have clearly failed to understand the depth of hurt and anger that is felt not only by the victims of abuse who have come forward, but also by conservative and progressive Catholics in America who feel equally betrayed by a church leadership that has gone to such extraordinary lengths to cover up the crimes of paedophile priests. The relentless media coverage over the past four months has exposed a culture of denial among bishops and priests that has caused as much scandal as the sex abuse itself. Many Americans are questioning not only the credibility of those responsible for the cover-ups, the buying of silence and the moving of offenders, but also the very church structures that allow bishops to act as if they are outside the law and accountable to no one for their moral decisions and their use of church funds. People and priests are openly calling for a place at the table and a voice that is heard if the broken trust between them and their bishops is to be restored. In the Boston Archdiocese, what began a few weeks ago as a small, ad hoc gathering of concerned priests now has more than 100 members who are committed to working together to promote a new style of church leadership. Six months ago, such an initiative would have been unthinkable because Cardinal Bernard Law, who is at the centre of the current crisis, would immediately have prohibited it.

The Pope's first public response to this scandal was to scapegoat the victimisers, the paedophile priests whom he accused of casting a shadow over the whole Church. The fact that he did not acknowledge, let alone condemn, the culture of denial lying at the heart of the problem makes one wonder whether those around him, including his American visitors, are capable of grasping the potential seriousness of this crisis for the Church as a whole.

The problem of paedophile priests and bishops covering their tracks for the "good of the Church" is not exclusive to the US, nor is the unfolding drama that we are witnessing now on the Vatican stage of a clash between Roman and American cultures. The cardinals sitting in conference with the Pope and his advisers are one-minded on matters of church doctrine and discipline; otherwise they would not have been appointed to the positions they now occupy.

The real clash that this present crisis exposes is one of theology. It is part of the unfinished business of the Second Vatican Council of the early 1960s, which left us with two equally valid, but competing, models or images of what the Church should be. One is a hierarchical structure governed by the Pope and his appointees, the bishops;the other the pilgrim people of God, each of equal standing as they gather around the Eucharistic table. In the immediate aftermath of the council people were encouraged to explore the wonder and mystery of being part of a Church that was not locked within the cultural and legal structures of previous centuries.

John Paul II's papacy began with a sense of renewed excitement, but it soon evaporated as the Vatican's efforts to micromanage the life of the local churches became more obvious. The Pope replaced the bishops who had spearheaded the reforms of Vatican II with men who felt more comfortable operating in an exclusively hierarchical model of Church. What we are seeing now is the unravelling of this counter-reform movement, as it is clear that some of these trusted appointees have feet of clay.

Norris, Pippa. 2002. “Islam & the West: Testing the Clash of Civilizations Thesis”.Abstract

In seeking to understand the root causes of the events of 9/11 many accounts have turned to Samuel P. Huntington's provocative and controversial thesis of a "clash of civilizations", arousing strong debate. Evidence from the 1995–2001 waves of the World Values Study provide survey evidence allowing us, for the first time, to sift the truth in this debate by comparing attitudes and values in 75 societies around the globe, including many Islamic and Western states.

The results confirm the first claim in Huntington's thesis: culture does matter, and indeed matters a lot, so that religious legacies leave their distinct imprint on contemporary values. But Huntington is essentially mistaken in assuming that the core clash between the West and Islamic worlds concerns democracy, as the evidence suggests striking similarities in the political values held in these societies. It remains true that Islamic nations differ from the West on issues of religious leadership, but this is not a simple dichotomous clash, as many countries around the globe display similar attitudes to Islam. Moreover the original thesis fails to identify the primary cultural fault line between the West and Islam, concerning the social issues of gender equality and sexual liberalization. The values separating Islam and the West revolve far more centrally around Eros than Demos.

Kennedy School of Government Working Paper Series, Working Paper Number:RWP02-015 Submitted: 04/22/2002

The full text of this paper can be downloaded through HOLLIS if you have a valid Harvard ID
Kremer, Michael. 2002. “Odious Debt”.Abstract

Some argue that sovereign debt incurred without the consent of the people and not for their benefit, such as that of apartheid South Africa, should be considered odious and not transferable to successor governments. We argue that an institution that truthfully announced whether regimes are odious could create an equilibrium in which successor governments suffer no reputational loss from failure to repay odious debt and hence creditors curtail odious lending. Equilibria with odious lending could be eliminated by amending creditor country laws to prevent seizure of assets for failure to repay odious debt and restricting foreign assistance to countries not repaying odious debt. Shutting down the borrowing capacity of illegitimate regimes can be viewed as a form of economic sanction and has two advantages over most sanctions: it helps rather than hurts the population, and it does not create incentives for evasion by third parties. However, an institution empowered to assess regimes might falsely term debt odious if it favored debtors, and if creditors anticipate this, they would not make loans to legitimate governments. An institution empowered only to declare future lending to a particular government odious would have greater incentives to judge truthfully. A similar approach could be used to reduce moral hazard associated with World Bank and IMF loans.

Pill, Huw. 2002. “Argentine Banks and Macroeconomic Risk: Overborrowing and Credit Dynamics.” Program for Honoring Professor Ronald McKinnon. Stanford Center for International Development.Abstract

Explanations of the boom/bust economic cycle characteristic of emerging markets have emphasized the role of institutional weaknesses in the financial sector in creating macroeconomic instability. Testing this proposition using aggregate data is complicated by the difficulty of identifying banks' credit supply decisions independently of credit demand by the domestic non–financial private sector. In this paper, a panel of Argentine bank balance sheet data is used to investigate the cross–sectional variation in bank lending decisions in response to macroeconomic shocks. The emergence of systematic cross–sectional patterns suggests bank characteristics – and thus bank behavior – play an important role in transmitting macroeconomic shocks to emerging market economies.

Hoff, Karla, and Joseph Stiglitz. 2002. “After the Big Bang? Obstacles to the Emergence of Rule of Law in Post-Communist Societies”.Abstract

When Russia launched mass privatization, it was widely believed that it would create a powerful constituency for the rule of law. That didn?t happen. We present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the Pareto efficient "rule of the game." The reason is that uncertainty about the legal regime can lead to asset stripping, and stripping can give agents an interest in prolonging the absence of the rule of law.


NBER Working Paper 9282, October 2002.

Desai, Mihir A. 2002. “International Joint Ventures and the Boundaries of the Firm”.Abstract

This paper analyzes the determinants of partial ownership of the foreign affiliates of U.S. multinational firms and, in particular, why partial ownership has declined markedly over the last 20 years. The evidence indicates that whole ownership is most common when firms coordinate integrated production activities across different locations, transfer technology, and benefit from worldwide tax planning. Since operations and ownership levels are jointly determined, it is necessary to use the liberalization of ownership restrictions by host countries and the imposition of joint venture tax penalties in the U.S. Tax Reform Act of 1986 as instruments for ownership levels in order to identify these effects. Firms responded to these regulatory and tax changes by expanding the volume of their intrafirm trade as well as the extent of whole ownership; four percent greater subsequent sole ownership of affiliates is associated with three percent higher intrafirm trade volumes. The implied complementarity of whole ownership and intrafirm trade suggests that reduced costs of coordinating global operations, together with regulatory and tax changes, gave rise to the sharply declining propensity of American firms to organize their foreign operations as joint ventures over the last two decades. The forces of globalization appear to have increased the desire of multinationals to structure many transactions inside firms rather than through exchanges involving other parties.


Harvard Business School Working Paper 03-017, July 2002.

Cooper, Richard N. 2002. “Reforming the International Financial System”.Abstract

Late in 2001 the new Deputy Managing Director of the International Monetary Fund (IMF), Anne Krueger, boldly suggested that under certain conditions international debt repayments by a sovereign borrower (= government) should be temporarily suspended while negotiations take place on restructuring its debt. Thus the IMF officially endorsed one of the more radical suggestions for improvements in the international financial architecture that have been made since the Mexican financial crisis of 1995 and the several Asian crises of 1997. This article provides analytical and historical background to evaluate this and other proposals for reform.

Eland, Ivan. 2002. “Religion and Terrorism Conference Paper: Excessive U.S. Military Action Overseas Breeds Anti-U.S. Terrorism”.Abstract

As the cataclysmic events of September 11 have receded farther into the past, U.S. policymakers and the public should have been able to think more clearly about the causes of those events. But that has not happened.

Just after the attacks, the initial wave of nationalistic feeling was understandable (similar sentiments held the day after the Japanese attack on Pearl Harbor in 1941). And the Bush administration's military action against al Qaeda and the Taliban in Afghanistan was equally understandable and justified, if not completely successful. After civilians were slaughtered so heinously on U.S. soil, the American people — recognizing the right to self–defense — would have been willing to incur a significant number of military casualties in Afghanistan to round up and kill or capture al Qaeda fighters. Yet on two separate occasions, despite its bellicose rhetoric, the Bush administration — fearing casualties, much as the Clinton administration had — allowed al Qaeda fighters to get away by timidly relying on Northern Alliance and Pakistani allies to pursue them rather than putting enough U.S. boots on the ground. What was needed then and what will be needed in the future is a robust, narrowly focused military response against terrorist groups that focus their attacks on U.S. targets. Unfortunately, a wider, less effective U.S. policy of military and covert action is being pursued by the Bush administration and supported by the American people. In fact, that indiscriminate U.S. military interventionism is a major cause of terrorism against the United States in the first place. For example, unnecessary U.S. military interventions in Georgia, the Philippines and Iraq will most likely cause more additional terrorist attacks on U.S. targets than they will prevent.

Mearsheimer, John J. 2002. “Religion and Terrorism Conference Paper: Hearts and Minds”.Abstract

The central purpose of American power is to provide security for the United States in a dangerous world. Before September 11, other states, especially other great powers, were perceived to be the main threat to the United States. To maximize its security, American policymakers worked assiduously to ensure that the United States held a favorable position in the global balance of power.
This template for thinking about American security policy has been altered somewhat by September 11. The United States still has to be deeply concerned with great power politics, particularly with the rise of China. But now it also has to confront Al–Qaeda, which has the United States in its gunsight and is determined to acquire weapons of mass destruction.
President Bush has not yet devised a clear strategy for combating terrorism. Nevertheless, he has been under intense pressure to view September 11 as a transformative moment that calls for the United States to become much more actively involved around the world. Indeed, some conservatives argue that it is time to create an American empire, where the United States dominates the entire globe and shapes it according to its own interests. Presumably, this ambitious strategy would keep great power rivals at bay as well as eliminate the terrorist threat.

Juergensmeyer, Mark. 2002. “Religion and Terrorism Conference Paper: Religion in the New Global War”.Abstract

When Mohammed Atta boarded the airline on September 11, 2001 that soon thereafter slammed into the World Trade Center towers, he left behind a manual of instruction. Apparently prepared by his colleagues in the al Qaeda network, it instructed him and his fellow activists how to behave and what to do in preparation for their fateful act. What is interesting about this document is not only the text, but the subtext. Lying beneath the pious rhetoric of the manual and its eerie ties to the World Trade Center tragedy are hints about the perplexing issue of the role of religion in the contemporary world, and answers to the persistent question, how could religion be related to such vicious acts of political violence?

The common sense way of putting this question about the September 11 attack and all of the other recent acts of religious terrorism is "what's religion got to do with it?" The common sense answers to this question are varied, and they are contradictory. On the one hand some political leaders–along with many scholars of comparative religion–have assured us that religion has had nothing to do with these vicious acts, and that religion's innocent images have been used in perverse ways by evil and essentially irreligious political actors. On the other hand there are the radio talk show hosts and even a few social scientists who affirm that religion, especially Islam, has had everything to do with it–and not just ordinary religion, but a perverse strain of fundamentalism that has infected normal religion and caused it to go bad.

A reading of the Atta manuscript shows both answers to be incorrect. In an analysis of this manual undertaken by a scholar of comparative religion, Bruce Lincoln, he leaves us with no doubt that Mohammed Atta and his eighteen accomplices on that dark morning of September 11 were filled with a religious zeal and undertook their hideous assignment in a ritualistic act of self–sacrifice following traditional tenets. Moreover, although the ideology of their mentors was influenced by a certain strain of Islamic political thought characterized by the writings of Mawdudi, al Banna and Faraj, to which only a minority of Muslims subscribe, the religious practices and rituals were themselves not deviant. The actions prescribed for the nineteen on the morning of September 11 were well within the norm not only for Islamic belief and practice, but also for many other religious traditions. Skewed though their political views may have been, one could say on the basis of this text that Atta and his colleagues died as good Muslims. Had they been Christians or Hindus they would have died as good adherents of those faiths as well.

Serra, Narcis. 2002. “Religion and Terrorism Conference Paper: Terrorism and the Future of Global Politics”.Abstract

The general topic of this conference points to the link between the concepts of religion and terrorism. The September 11th attacks – and the previous and subsequent terrorist attacks in Bali and other parts of Asia – highlight the importance of gathering as much information as possible on Islam–related terrorism.

Islamic fundamentalism has added new dimensions to the phenomenon of terrorism. Here I would like to mention two. First, the widespread potential or actual support for this terrorism: Muslims make up a large proportion of the world's population and this, along with the current level of technological advance, combine to make Islamic terrorism a truly global problem. Second, Islamic fundamentalism has brought a new lethality to terrorist actions through the suicide attack.

Serra, Narcis. 2002. “Religion and Terrorism Conference Paper: Terrorismo Y El Futuro De La Política Global”.Abstract

El título general de esta conferencia liga los conceptos de religión y terrorismo. Los ataques del 11 de septiembre – y los anteriores y otros posteriores en a isla de Bali y otras partes de Asia – muestran la necesidad de contar con el mayor conocimiento posible sobre el terrorismo vinculado a la religión islámica.

El fundamentalismo islámico, en efecto, ha añadido dimensiones nuevas al fenómeno terrorista. Quiero señalar dos. En primer lugar la extensión de las bases de apoyo, potenciales o reales: los países islámicos son una proporción muy grande de la población mundial y ello unido a las posibilidades tecnológicas actuales convierte a este terrorismo en un problema ciertamente global. En segundo lugar, el fundamentalismo isl´mico ha añadido un enorme incremento de la letalidad de las acciones terroristas al incluir el suicidio como forma de llevar a cabo el ataque.

Leaning, Jennifer. 2002. “Was the Afghan Conflict a Just War?”.Abstract

Wars fought to redress grievous wrongs or put a stop to evil have been termed "just wars." The concept has its origins in classical and theological philosophy and was explicit in the Christian ethics of Saint Augustine. Just war theory describes narrow circumstances and tight constraints on the ends and means that are required to apply this term. Although Western law has slowly come to accept war as an inevitable instrument of national policy and turned its attention to setting standards for the conduct of war, important echoes of just war theory remain. A distinction was made at Nuremberg, and later embedded in articles 2 and 51 of the United Nations charter, between unacceptable aggressive war and acceptable wars of self defence. Contemporary arguments about particular wars still rely on the seven main principles of just war theory. Application of these principles to the conflict in Afghanistan does not settle the debate but it might help to structure the discussion.

Watson, James L. 2002. “Globalization and Culture”.Abstract

Globalization is the process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Extreme views of this process stress the destruction of local cultures and the homogenization of life styles, caused by the spread of American and Japanese popular culture. This article reviews arguments for and against the cultural imperialism hypothesis, and concludes that globalization is in the eyes of the beholder. An anthropological approach to these issues hinges upon the distinction between form and content (or outward appearance versus internal meaning). Does the appearance of a McDonald's restaurant necessarily imply that local consumers are being Americanized? Many commentators, notably journalists and politicians, confuse form with content and do not look closely at the ways ordinary people incorporate global influences into their everyday lives. This article examines several cultural systems that are said to foster globalization: fast food, film, television, style, pop music, and the internet.

Nye, Joseph S., Jr. 2001. “How to Protect the Homeland”. Publisher's VersionAbstract

Five years ago, with James Woolsey, former director of the Central Intelligence Agency, I headed a government study that found a lack of preparedness to face catastrophic terrorism. Our warnings and those of similar groups went largely unheeded. On Sept. 11, complacency was wiped away, but the fragmented bureaucratic structure and procedures of our government remain a barrier to action, despite President Bush's decision to name Gov. Tom Ridge of Pennsylvania to head a new Office of Homeland Defense.

By using the rhetoric of war to frame our response to the terror attacks, President Bush has marshaled the public's patriotism and persuaded Congress to provide financing. But the danger in the rhetoric is that the new office may be structured like a military organization.

There are many types of terrorism and many kinds of terrorist weapons. Even if we succeed in eliminating Osama bin Laden, we have to remember that Timothy McVeigh was home-grown. And as we succeed in battening down the cockpits to prevent civilian aircraft being used again as giant cruise missiles, terrorists will be exploring other vulnerabilities in our open society and investigating even more devastating weapons.

Fortunately, nuclear and biological weapons are not as easy to make as popular fiction suggests, but there have been reports that Mr. bin Laden and others have tried to purchase stolen nuclear weapons from the former Soviet inventory. We also know that a few years ago the Japanese Aum Shinrikyo cult killed people with both chemical and biological agents.

Suppressing terrorism is very different from a military campaign. It requires continuous, patient, undramatic civilian work and close cooperation with other countries. And it requires coordination within our government.

The C.I.A. and F.B.I. must improve their ability to work together on detection and must reconcile their different authorities and programs in intelligence and law enforcement. The F.B.I., the Immigration and Naturalization Service, the Customs Service, the Defense Department and other agencies must improve their cooperation. Because of poor coordination, two suspects were able to enter this country even after their names had been placed on a watch list, and the jet fighters that scrambled after the Federal Aviation Administration notification of the hijackings arrived too late.

The Federal Emergency Management Agency has to work with local governments on domestic responses. New federally funded research and development programs are needed to address each phase of a crisis, as well as to accelerate new technologies and devise special training and testing exercises.

It would be a mistake if the Office of Homeland Defense merely added another layer of bureaucracy. Instead, Governor Ridge should head a committee of deputy secretaries from the agencies with control over budgets and programs involved with terrorism defense. He should create a small staff that works closely with the Office of Management and Budget to monitor plans to be carried out by existing agencies.

His office should be supported by new research corporations created to deal with terrorism, as the RAND corporation was created in the cold war to deal with the nuclear threat. These groups should not be bound by the rigidities and inadequate salaries of the federal bureaucracy. Their independence should allow them to plan an antiterror system that can find gaps and overlaps in government agencies' antiterror efforts and examine weaknesses in private systems like computer networks.

Planners should conduct regular exercises with teams simulating terrorists and defenders, trying to outsmart each other. Had we done this for our airport security system, we might have realized that it was designed to detect guns and bombs but not to stop suicide pilots armed with knives and box cutters.

As recently as last spring, a commission on national security headed by former Senators Gary Hart and Warren Rudman also warned of our lack of preparedness. Sadly, the commissioners were right. Now we must organize ourselves effectively to combat terrorism.

On the 10th anniversary of 9/11, Joseph S. Nye, Jr. recorded a video for the New York Times commenting on this Op-ed piece that he wrote for the newspaper.
Domínguez, Jorge I. 2001. “Cuba En Las Americas: Ancla Y Viraje”.Abstract

EL PARTEAGUAS MUNDIAL DE FINES DE LOS OCHENTA y comienzos de los noventa no dejó de afectar a Cuba. El derrumbe de los regímenes comunistas europeos y, en particular, de la Unión Soviética puso fin también a una larga etapa de la historia de Cuba comenzada en 1960. En su sistema político, económico y social, Cuba había sido distinta del resto de América durante las últimas tres décadas de la Guerra Fría en Europa. Con la desaparición de su principal aliado internacional, el gobierno de Cuba, acorralado, se vio obligado a iniciar un viraje en la conducción de su política nacional e internacional. Ese viraje, sin embargo, fue un golpe de timón de un buque anclado, cuyo piloto reorienta el barco sin alterar su equilibrio a pesar de un fuerte oleaje.

Robinson, James A. 2001. “Inefficient Redistribution”.Abstract

American Political Science Review, 95, 649-662

There are many well–developed theories that explain why governments redistribute income, but very few can explain why this often is done in a socially inefficient form. In the theory we develop, compared to efficient methods, inefficient redistribution makes it more attractive to stay in or enter a group that receives subsidies. When political institutions cannot credibly commit to future policy, and when the political influence of a group depends on its size, inefficient redistribution is a tool to sustain political power. Our model may account for the choice of inefficient redistributive policies in agriculture, trade, and the labor market. It also implies that when factors of production are less specific to a sector, inefficient redistribution may be more prevalent.

Robinson, James A. 2001. “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution”.Abstract

Among countries colonized by European powers during the past 500 years, those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanizations patterns and population density, which we argue, proxy for economic prosperity. This reversal weighs against a view that links economic development to geographic factors. Instead, we argue that the reversal reflects changes in the institutions resulting from European colonialism. The European interventions appears to have created an "institutional reversal" among these societies, meaning that Europeans were more likely to introduce institutions encouraging investment in regions that were previously poor. This institutional reversal accounts for the reversal in relative incomes. We provide further support for this view by documenting that the reversal in relative incomes took place during the late eighteenth and early nineteenth centuries, and resulted from societies with good institutions taking advantage of the opportunity to industrialize.
This paper documents a reversal in relative incomes among the former European colonies. For example, the Mughals in India and the Aztecs and Incas in the Americas were among the richest civilizations in 1500, while the civilizations in North America, New Zealand, and Australia were less developed. Today the United States, Canada, New Zealand, and Australia re an order of magnitude richer than the countries not occupying the territories of the Mughal, Aztec, and Inca Empires.