Transcript Early Starts, Reversals and Catch

Early Starts, Reversals and
Catch-up in The Process of
Economic Development
Areendam Chanda
Louisiana State University
Louis Putterman
Brown University
We begin with two possibly
conflicting observations.
Observation 1
• Levels of income and recent rates of
growth are positively correlated with “early
development” (Diamond, 1998; Hibbs and
Olsson, 2004a,b; Burkett,Humblet and
Putterman, 1998; Bockstette, Chanda and
Putterman, 2001)
Observation 2
• Rates of growth between 1500 and recent
times are negatively correlated with early
development (level of urbanization in
1500) – Acemoglu, Johnson and Robinson
2002 “Reversal of Fortune”
The two observations appear to be
conflicting because urbanization goes
hand-in-hand with other indicators of early
development (population density, early
agricultural transition, long-term presence
of states).
What we do in the paper
• We provide the following simple
reconciliation of the two observations:
1. Level of development in 1500 was
positively predicted by early development.
2. Rate of growth from 1500 to 1960 was
negatively predicted by early development.
3. Rate of growth from 1960 to 1998 is
positively predicted by early development.
in other words
• The AJR “reversal” in colonized countries
is real, but
• It applies to the era of European
expansion and not to the post-World War II
era (except as a remnant)
• The Diamond/Hibbs-Olsson/et al.
observation holds for most of the time
since the agricultural revolution.
implication
• The AJR arguments about institutions
introduced in the colonial era do not seem
to hold for explaining differences in growth
rates from 1960 to present, the main
period studied by modern growth and
development economists. (This is not to
take a position about institutions versus
geography in general.)
Early development:
concept and measurement
• Early development or early starts are
indicated by
1. early transition from hunting and
gathering to agriculture
2. early appearance of villages, dense
populations, and eventually states
3. increases in specialization,
development of technology, organizational
complexity etc.
measures we use
• Agyears = years since transition to
agriculture, based on Hibbs-Olsson
estimates (and Diamond)
• Statehist = proportion of years since 1 CE
that country had a super-tribal polity (i.e., a
state), downweighted if colonial,
geographically restricted, or if multiple
competing states (Bockstette, Chanda,
Putterman)
• We mainly use statehist1500, which
covers only the years 1 to 1500 CE.
• We check some correlations for other
measures, for example statehist50
(statehist 1000) covers only state status
during 1 to 50 CE (1 to 1000 CE)
agyears – statehist correlation
AGYEARS
Sample: All Countries (n=90)
AGYEARS
STATEHIST50
STATEHIST500
STATEHIST1000
STATEHIST1500
S50
S500
S1000
S1500
1.00
0.49
0.57
1.00
0.68
0.73
0.94
0.83
0.72
1.00
0.93
0.82
1.00
0.94
1.00
1.00
0.98
0.90
0.76
1.00
0.94
0.82
1.00
0.93
1.00
Sample: Colonized Countries (n=64)
AGYEARS
STATEHIST50
STATEHIST500
STATEHIST1000
STATEHIST1500
1.00
0.48
0.53
0.62
0.66
Does early development
raise income?
• Possibly early development does not raise
ordinary people’s incomes - - “Malthusian
growth”
• Available estimates nonetheless suggest
that areas further ahead in population
density, urbanization, and state presence
as of 1500 had somewhat higher incomes.
Overview of Analysis
• First, demonstrate that incomes in 1500
are positively predicted by early starts.
• Second, demonstrate that growth from
1500 to 1960 in non-European countries is
negatively predicted by early starts.
• Third, demonstrate that growth from 1960
to 1998 in non-European countries is
positively predicted by early starts.
Estimating income in 1500
Constant
Urbanization in
1500
Log Population
Density in 1500
R-Square
Observations
1
2
6.133***
(0.062)
0.024***
(0.006)
6.132***
(0.05)
0.016***
(0.005)
0.058***
(0.015)
0.38
32
0.55
32
We use urbanization 1500 from Bairoch (1988) and AJR (2002). The data for population
densities are calculated by using population numbers from Maddison (2001) and land
area numbers from FAO Statistics. Regressions 1 and 2 are alternately used to estimate
income of 1500. ***- denotes significance at 1%, **- at 5% and *- at 10%.
Income 1500 predicted
by early start
Explaining (predicted) GDP per capita in 1500
1
4
5
6
Dependent Variable
Predicted Log GDP pc 1500
Predicted Log GDP pc 1500
(urbanization only)
(urbn + popden)
Constant
6.227*** 6.059***
6.18***
6.146*** 5.798***
5.96***
(0.018)
(0.08)
(0.08)
(0.028)
(0.099)
(0.096)
STATEHIST 0.243***
0.206*** 0.392***
0.265***
1500
(0.045)
(0.05)
(0.058)
(0.075)
AGYEARS
0.034***
0.007
0.064***
0.03**
(0.01)
(0.011)
(0.012)
(0.013)
Observations
R- Square
61
0.29
2
55
0.16
3
53
0.27
61
0.46
55
0.36
52
0.47
1200
ITA
1100
1000
900
BEL
800
SWE
700
BGD
600
PAN
SLV
CRI
NIC
COL
PHL
PNG
DOM
JAM
HTI
500CHL
PRY
VEN
GUY
BRA
ARG
CAN
USA
AUS
NZL
ECU
HND
GTM
SGP
FIN
NLD
DNK CHEFRA
GBR
AUT
ESP
DEU
MAR
NOR
PAK
EGY
PRT
TUR
KOR
LKA
TUN
MMRCHN
IDNDZAPER
IND
BOL
MYS
JPN
GRC
MEX
HKG
400
URY
300
0
0.20
0.40
0.60
0.80
1
Note that this is the first formal direct
test of the core hypothesis in
Diamond (1998) on a large sample of
countries.
Documenting the reversal
of fortune (1500 – 1960)
Dependent variable: Log GDP p.c. 1960
1
Urbanization
1500
Log
Population
Density 1500
Log GDP pc
1500
(urbanization
only)
Log GDP pc
1500
(urbn
+popden)
R-Square
Observations
2
3
4
-.044**
(0.023)
-0.223***
(0.044)
-1.83**
(0.953)
-2.549***
(0.588)
0.10
37
0.21
73
0.10
37
0.34
37
Documenting the reversal
of fortune (1500 – 1960)
Dependent variable: Log GDP p.c. 1960
STATEHIST
1500
AGYEARS
-0.672***
(0.232)
R-Square
Observations
0.09
65
-1.05***
(0.255)
-0.014
(0.037)
0.001
59
-0.26***
(0.045)
0.26
36
0.51
31
Notes: Last two columns restrict sample to countries for
which we also have estimated 1500 GDP numbers.
Constant included but suppressed
Robustness checks
• Test for convergence
• Add various combinations of (a)
landlocked, (b) latitude, (c) colonizing
power (France, Spain), (d) years
colonized.
• Substitute PWT for Maddison estimate of
1960 GDP p.c.
• Substitute growth rate 1500 – 1960 for log
GDP p.c. 1960 and test for convergence.
Log GDP pc
1500
(urbn
+popden)
STATEHIST
1500
AGYEARS
LANDLOCK
LATITUDE
(Absolute
Value)
French Colony
Spanish
Colony
Years
Colonized
Sample: AJR sample of colonized countries, excluding
Hong Kong, Singapore and Western Offshoots
1
2
3
4
5
6
7
8
-1.81**
(0.68)
-0.006***
(0.001)
-1.25**
(0.54)
-0.48*
(0.27)
-2.00**
(0.85)
-2.1***
(0.51)
-0.40
(0.35)
-0.81***
(0.25)
-0.42
(0.27)
0.001
(0.008)
-0.63***
(0.14)
.013**
(0.007)
0.20
(0.27)
-0.38*
(0.18)
-.44
(0.18)
**
-0.001*
(0.0006)
-0.20***
(0.05)
-.33**
(0.14)
0.014**
(0.006)
0.20
(0.22)
0.72***
(0.18)
.0006
(.0005)
0.23
(0.15)
0.93***
(0.17)
.0006
(.0006)
0.34**
(0.15)
0.40*
(0.22)
-.001
(.0007)
**
0.38
0.59
0.41
0.26
0.61
0.48
0.57
0.38
R-Square
36
31
36
64
36
65
66
36
Observations
Notes: Columns 1-6 use Maddison’s estimates of Log Real GDP pc in 1960 as the dependent
variable. Column 7 uses the PWT estimate of the log of real GDP pc in 1960 as the dependent
variable. Column 8 uses growth rate as the dependent variable. Constant included in all regressions
but suppressed. ***- denotes significance at 1%, **- at 5% and *- at 10%.
Documenting “catch-up” 1960-98
Dependent Variable: Log GDP per Capita 1998
Sample: AJR sample of colonized countries, excluding
Hong Kong, Singapore and Western Offshoots
1
2
3
4
5
6
Urbanization in -0.03
0.004
1500
(0.02) (0.014)
0.22
Log GDP pc
(0.53)
1500
(urbn +popden
0.837*** 0.86*** 0.94***
1.22***
1.01***
Log GDP pc
(0.102)
(0.11)
(0.11)
(0.15)
(0.11)
1960
0.41*
0.55***
STATEHIST
(0.24)
(0.20)
1500
0.16***
AGYEARS
(.06)
7
1.05***
(0.13)
0.15***
(0.03)
0.05
0.68
0.68
0.71
0.78
0.63
0.68
R-Square
37
37
37
36
31
65
59
Observations
Note: Constant included in all regressions but suppressed. ***- denotes significance at 1%, **- at
5% and *- at 10%.
0.08
KOR
BWA
0.06
THA
CHN
MYS
0.04
MUS
SWZ
CPV
PAN
DOM
BRA
CHL
GUY
COL
PRY
CRI
TTO
ECU
URY
ARG
PHL
ZWE
SLV
KEN
COG HND
PNG
JAM
GMB
BEN
ZAF
GAB
RW
A CIV
UGA
VEN
TGO
MOZ
ISR
IND
MEX
SYR
JOR
0.02
0HTI
NIC
CAF
ZMB
MDG
-0.02
-0.04
0
IDN
MRT
BGD
GTM
MLI
NGA
CMR
GHA
IRN
BOL
TUNPAK
EGY
TUR
MAR
MMR
NPL
DZA
PER
SEN
AFG
NER
AGO
0.20
0.40
0.60
0.80
LKA
Dependent Variable: Log GDP per Capita 1998++
Sample: AJR sample of colonized countries, excluding
Hong Kong, Singapore and Western Offshoots
1
2
3
4
5
6
Log GDP pc 1960
STATEHIST1500
LANDLOCK
LATITUDE
(Absolute Value)
French Colony
Spanish Colony
Years Colonized
0.94***
(0.13)
0.43*
(0.22)
-.15
(0.18)
-.002
(.006)
0.95***
(0.10)
0.48**
(0.23)
-.08
(.18)
.009
(.006)
0.99***
(0.14)
0.47*
(0.25)
0.92***
(0.13)
0.57***
(0.19)
-0.33
(0.20)
-0.21
(0.17)
.0004
(.0007)
-0.35**
(0.15)
0.16
(0.18)
-.00002
(0.0007)
0.74***
(0.11)
0.43**
(0.21)
0.74***
(0.15)
0.50**
(0.20)
7+
8++
0.61***
(0.12)
0.30#
(0.18)
-0.19
(0.16)
0.003
(0.006)
-0.19
(0.16)
0.10
(0.16)
-0.0003
(0.0006)
0.50***
(0.13)
-15.52
(16.04)
0.64
(1.07)
-0.001
(0.003)
0.01*
(0.006)
0.38**
0.35**
Log(Investment)
(0.17)
(0.14)
1960- 2000
1.07
1.98**
Population Growth
(12.36)
(0.83)
(1960-2000)
0.80
3.53
Secondary
(0.80)
(11.90)
Enrollment Ratio
1960
0.71
0.65
0.75
0.65
0.75
0.76
0.77
0.17
R-Square
36
64
36
65
32
56
59
36
Observations
Notes: Columns 1-6 use Maddison’s estimates of Log Real GDP pc in 1998 as the dependent
variable. + :Column 7 uses the PWT estimate of the log of real GDP pc in 1995 as the dependent
variable. ++: Column 8 uses growth rate as the dependent variable. Constant included in all
regressions but suppressed. ***- denotes significance at 1%, **- at 5% and *- at 10%. #: the p-value
Conclusion
• We’ve demonstrated that early starts are
positively correlated with (a) income in
1500, and (b) growth during 1960-98.
• We’ve reconfirmed the “reversal of
fortune” for 1500-1960 using “early start”
indicators, but found a “reversal of the
reversal” underway after 1960.
• The effects of colonially imposed
institutions seem to have worn off some
time after 1960.
• Modern growth is more related to “social
capability” built up over two millennia than
to differences in colonial institutions.
• Hibbs & Olsson and Bockstette, Chanda
and Putterman find that early development
(agriculture or states) predicts current
quality of institutions, some other
institutional measures.
• Perhaps the biggest long-term colonial
impact is that from large-scale population
movements, which may have transferred
old social capabilities with them—
something to be explored in future
research. (This may help to explain Hall &
Jones and La Porta, Lopez-de-Silanes,
Shelifer and Vishny).