Abstract
Some existing studies argue that indirect colonial rule adversely affects postcolonial development. To analyze the situation under which a colonial power adopts indirect rule to govern a colony, we analyze a delegation model wherein the colonial power decides whether to delegate policy choice to an agent who has an information advantage but has different policy preferences from that of the colonial power. The colonial power decides whether to delegate policy choice in multiple districts, and can acquire information by paying a cost in each district. We show that colonial powers are prone to adopt indirect rule when the heterogeneity among districts is high. The results are a possible explanation for why colonial powers utilized indirect rule in Africa, a region with high levels of ethnic diversity.
Highlights
Developing countries experienced divergent economic development paths during the last half of the twentieth century: while some Asian countries experienced rapid growth, the economies in most Sub-Saharan African countries stagnated
Under which colonial powers build centralized governing structures to dominate entire region of colonies, favors postcolonial development by leaving effective state capacity, indirect colonial rule, under which autonomous governing power is delegated to indigenous rural elites, harms state building and growth after independence [1]-[4]
This paper provides a simple theoretical logic that links a colony’s heterogeneity and the form of governance by colonial powers
Summary
Developing countries experienced divergent economic development paths during the last half of the twentieth century: while some Asian countries experienced rapid growth, the economies in most Sub-Saharan African countries stagnated. Under which colonial powers build centralized governing structures to dominate entire region of colonies, favors postcolonial development by leaving effective state capacity, indirect colonial rule, under which autonomous governing power is delegated to indigenous rural elites, harms state building and growth after independence [1]-[4] This raises a natural question: what is the source of such divergent forms of colonial governance?1. When the degree of heterogeneity is large, the information acquired in a district is less useful to govern another district In this situation, if the uncertainty about policy outcomes is considerably large, directly governing the colony is costly for the colonial power, and indirect rule is adopted
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