The Colonial and Geographic Origins of Comparative Development

While the direct impact of geographic endowments on prosperity is present in all countries, in former colonies, geography has also affected colonization policies and institutional outcomes. Thus, one can disentangle the partial effects of endowments and institutions on income by utilizing the interaction of geography and colonial experience. I first document that climate and disease did affect institutional development in the group of former colonies while this is not the case in the rest of the world. Second, I develop an empirical strategy that identifies the relation between institutions and income but that also accounts for the direct effect of endowments. I find that institutions are the main determinant of development and that endowments also have a sizeable direct impact on development. Third, I highlight the importance of disease environment for both colonization policies and income directly.