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Introduction to Modern Economic Growth variety of evidence suggesting that the major effect of European settler mortality is through institutions In particular, Acemoglu, Johnson and Robinson (2001) argue that: (1) There were different types of colonization policies which created different sets of institutions At one extreme, European powers set up “extractive states”, exemplified by the Belgian colonization of the Congo These institutions did not introduce much protection for private property, nor did they provide checks and balances against government expropriation At the other extreme, many Europeans migrated and settled in a number of colonies The settlers in many areas tried to replicate European institutions, with strong emphasis on private property and checks against government power Primary examples of this include Australia, New Zealand, Canada, and the United States (2) The colonization strategy was influenced by the feasibility of settlements In places where the disease environment was not favorable to European settlement, extractive policies were more likely (3) The colonial state and institutions persisted to some degree and make it more likely that former European colonies that suffered extractive colonization have worse institutions today Summarizing schematically, the argument is: (potential) settler early current current ⇒ settlements ⇒ ⇒ ⇒ mortality institutions institutions performance Based on these three premises, Acemoglu, Johnson and Robinson (2001) use the mortality rates expected by the first European settlers in the colonies as an instrument for current institutions in the sample of former European colonies Their instrumental-variables estimates show a large and robust effect of institutions on economic growth and income per capita Figures 4.11 and 4.12 provide an overview of the evidence Figure 4.11 shows the cross-sectional relationship between income per capita and the measure of economic institutions we encountered in Figure 4.1, protection against expropriation risk It shows a very strong relationship between the historical mortality risk faced by Europeans and the current extent to which property rights are enforced A bivariate regression has an R2 of 0.26 It also 194