Good, Bad, and Ugly Colonial Activities : Studying Development Across the Americas

Levels of economic development vary
widely within countries in the Americas. This paper argues
that part of this variation has its roots in the colonial
era. Colonizers engaged in different economic activities in
different regions of a country, depending on local
conditions. Some activities were "bad" in the
sense that they depended heavily on the exploitation of
labor and created extractive institutions, while
"good" activities created inclusive institutions.
The authors show that areas with bad colonial activities
have lower gross domestic product per capita today than
areas with good colonial activities. Areas with high
pre-colonial population density also do worse today. In
particular, the positive effect of "good"
activities goes away in areas with high pre-colonial
population density. The analysis attributes this to the
"ugly" fact that colonizers used the pre-colonial
population as an exploitable resource. The intermediating
factor between history and current development appears to be
institutional differences across regions and not income
inequality or the current ethnic composition of the population.