Factor Endowments, Inequality, and Paths of Development Among New World Economics

Abstract

ABSTRACT Whereas traditional explanations of differen ces in long-run paths of development acrossthe Americas generally point to the significance of differences in national heritage or religion,we highlight the relevance of stark contrasts in the degree of inequality in wealth, human capital,and political power in accounting for how fundame ntal economic institutions evolved over time.We argue, moreover, that the roots of these disparities in the extent of inequality lay indifferences in the initial factor endowments (dating back to the era of European colonization).We document -- through comparative studies of suffrage, public land, and schooling policies --systematic patterns by which societies in the Am ericas that began with more extreme inequalityor heterogeneity in the population were more likely to develop institutional structures that greatlyadvantaged members of elite classes (and disa dvantaging the bulk of th e population) by providingthem with more political influence and access to economic opportunities. The clear implicationis that institutions should not be presumed to be exogenous; economists need to learn more aboutwhere they come from to understand their relation to economic development. Our findings notonly contribute to our knowledge of why extreme differences in the extent of inequality acrossNew World economies have persisted for centuries, but also to the study of processes of long-runeconomic growth past and present. Stanley L. Engerman Kenneth L. SokoloffDepartment of Economics Department of EconomicsUniversity of Rochester University of California, Los AngelesRochester, NY 14627 Los Angeles, CA 90095and NBER and NBERenge@troi.cc.rochester.edu sokoloff@ucla.edu