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Introduction to Modern Economic Growth The evidence in Acemoglu, Johnson and Robinson (2002a) shows a close connection between initial population density, urbanization, and the creation of good economic institutions In particular, the evidence points out that, others things equal, the higher the initial population density or the greater initial urbanization, the worse were subsequent institutions, including both institutions right after independence and also institutions today Figures 4.9 and 4.10 illustrate these relationships using the same measure of current economic institutions used in Figure 4.1, protection against expropriation risk today They document that the relatively densely settled and highly urbanized colonies ended up with worse institutions, while sparsely-settled and non-urbanized areas received an influx of European migrants and developed institutions protecting the property rights of a broad cross-section of society European colonialism therefore led to an “institutional reversal,” in the sense that the previously-richer and more-densely settled places ended up with worse institutions The institutional reversal does not mean that institutions were better in the previously more densely-settled areas It only implies a tendency for the relatively poorer and less densely-settled areas to end up with better institutions than previously-rich and more densely-settled areas As discussed in footnote above, it is possible that the Europeans did not actively introduce institutions discouraging economic progress in many of these places, but inherited them from previous civilizations there The structure of the Mughal, Aztec and Inca empires were already very hierarchical with power concentrated in the hands of narrowly based ruling elites and structured to extract resources from the majority of the population for the benefit of a minority Often Europeans simply took over these existing institutions What is important in any case is that in densely-settled and relatively-developed places it was in the interests of Europeans to have institutions facilitating the extraction of resources, without any respect for the property rights of the majority of the populace In contrast, in the sparselysettled areas it was in their interests to develop institutions protecting property rights These incentives led to an institutional reversal 190