European influence and economic development

Abstract

The development accounting literature identifies political institutions as fundamental development determinants. Forms of government or executive constraints are thought to shape economic institutions (e.g., property rights) that provide necessary incentives for economic growth. One strand of the literature suggests that European influence is a crucial economic development determinant, presumably through the adoption of European institutions. But how exactly did European influence in the distant past induce positive economic outcomes today? Previous approaches rely on “language,” “settler mortality,” “legal origins” or the “number of European settlers” as indirect proxies of European influence. We propose a direct and quantifiable mechanism: the adoption of European constitutional features. We construct a dataset of all constitutional dimensions from 1800–2008 for all countries and find that nations experience growth accelerations after adopting features of European constitutions. The growth effects are influenced (negatively) by periods of political turmoil, but they are independent of colonial backgrounds. These results show how European influence may have fostered growth, and they imply that countries were able to overcome adverse initial conditions over the last 200 years by adopting European constitutional features. Our constitutional dataset is sufficiently detailed to identify the specific dimensions of European constitutions that matter most for development: legislative rules and specific provisions that curtail executive powers.