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1 Journal of Comparative Economics 37 (2009) Contents lists available at ScienceDirect Journal of Comparative Economics journal homepage: On the democratic legacy of colonialism Ola Olsson * Dept. of Economics, University of Gothenburg, Box 640, Göteborg, Sweden article info abstract Article history: Received 5 September 2007 Revised 17 August 2009 Available online 28 August 2009 JEL classification: N40 P50 Keywords: Colonialism Democracy Mercantilist Imperialist Development Olsson, Ola On the democratic legacy of colonialism The article features a temporal approach to analyzing the impact of Western colonialism on contemporary levels of democracy. We present a new data set with dates of colonization, independence, and a colonizing event for all former colonies and dependencies that are regarded as countries today (143 observations). Our data, as well as the existing literature, suggest that the very heterogeneous era of colonization should be divided into an early mercantilist wave and a much later imperialist wave with quite different characteristics. We show that there is a strong positive effect of colonial duration on democracy, an effect which turns out to be driven primarily by former British colonies and by countries colonized during the imperialist era. Journal of Comparative Economics 37 (4) (2009) Dept. of Economics, University of Gothenburg, Box 640, Göteborg, Sweden. Ó 2009 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved. 1. Introduction The legacy of Western colonialism still exerts a significant influence on communities around the world. In the economics literature, seminal works such as North (1990), Hall and Jones (1999), Sokoloff and Engerman (2000), and Acemoglu, Johnson, and Robinson (henceforth AJR) (2001, 2002) trace the fundamental reason for persistent underdevelopment and stagnant economic growth back to weak institutions that countries inherited from colonial times. A new research agenda on the social impact of colonialism has recently appeared that builds on this tradition. 1 The backbone of this article is the notion that the timing and duration of colonial activities during the last half millennium is crucial for our understanding of its long-run impact on societies. Our ultimate dependent variable is the level of democracy rather than economic performance. Apart from the obvious observation that democracy is regarded as desirable in itself, a major reason for this focus is that the accumulation of democratic capital, i.e. a history of extensive democratic experience, has been shown to increase the likelihood of a stable democratic rule in the future, which in turn is conducive to investment and economic growth (Persson and Tabellini, in press). Furthermore, although the direct linkages between democracy and income levels appear to be weak in the short and medium run, the clear positive association in the long run can be explained by the fact that countries often embark on divergent political-economic development paths at critical junctures in history that either take them to poverty and autocracy or to economic growth and democracy (Acemoglu et al., 2008). For former colonies, such critical junctures are inevitably the onset and establishment of colonial rule, as well as independence from such rule. * Fax: address: ola.olsson@economics.gu.se 1 See for instance the empirical works by Grier (1999), Bertocchi and Canova (2002), Rodrik et al. (2004), Lange (2004), Banerjee and Iyer (2005), and Nunn (2008) and the theoretical papers by Congdon Fors and Olsson (2007) and Nunn (2007) /$ - see front matter Ó 2009 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved. doi: /j.jce

2 O. Olsson / Journal of Comparative Economics 37 (2009) In this article, we attempt to provide two broad contributions to the literature: Firstly, to present a universal sample of all former Western colonies that currently are regarded as countries in the World Bank statistics. Our sample, by far the largest in the literature, includes 143 such countries with dates of colonization and independence and a specified founding event. A qualitative and quantitative conclusion from this section, which indeed confirms what several other works have suggested, is that the extremely heterogeneous era of Western colonization nonetheless might be divided into an early mercantilist wave and a much later imperialist wave with quite different characteristics. Secondly, we carry out a general investigation of the effect of colonial duration and time of independence on contemporary levels of democracy. The most important findings are that there is a general positive relationship between the duration of colonial rule and current democracy, even after controlling for time of independence and the level of democracy at independence. The positive relationship is shown to be mainly driven by the experience of former British colonies and by countries colonized after 1850 during a more liberal era. Our work is related to a huge number of books and articles, all of which can not be reviewed here. Our major argument about two distinct waves/types of colonization, as well as our working definition of a colony, are inspired by Osterhammel s (2005) excellent survey of colonial theory, Curtin s (1989, 1998) important research on colonialism and medical history, Fieldhouse s (1984) and Pakenham s (1991) accounts of the imperialist era, and Lange et al s (2006) comparisons of British liberal vs. Spanish mercantilist colonialism. Several other research projects in economics have gathered extensive colonial samples for instance Grier (1999), AJR (2001), Feyrer and Sacerdote (2006), and Ertan and Putterman (2008) but no other article has, to our knowledge, explicitly attempted to track all former colonies in the world and identify founding events. We hope that our sample therefore might serve as a reference for future empirical work on colonialism. Recent research on colonialism has mainly investigated two basic hypotheses: Firstly, the geography and endowmentsview, proposing that colonial institutions were strongly affected by the disease environment (AJR, 2001), by pre-colonial population densities and levels of urbanization (AJR, 2002), and (in the Americas) by the potential for sugar plantations and mining (Sokoloff and Engerman, 2000). 2 This literature shows convincingly that where settler mortality was high due to tropical diseases, where there was an abundance of lootable minerals, and where a dense population could easily be exploited, Western colonists tended to install extractive, rent seeking institutions with weak private property rights that were harmful for long-run development. In the second national origins-hypothesis, differences in colonial policy are attributed to the legal systems and the different national ideologies of the colonizing countries. La Porta et al. (1999) as well as Djankov et al. (2003) emphasize the legal tradition of the colonizer, in particular the important difference between common law (British tradition) and civil law (French tradition). It is argued that the former legal tradition has proved to be more conducive to constraints against the executive than the latter. North (1990), Grier (1999), and Lange et al. (2006) consider the different ideologies of the Spanish and the British colonists and argue that British colonial institutions typically featuring freedom from expropriation and a preference for free trade have been central for economic development. In this article, we focus instead on the temporal dimension of colonization. We argue that while both the geography and the national origins hypotheses give important insights about the process of institutional development, they need to be complemented with a more comprehensive theory of the importance of the timing of colonialism. Temporal aspects, such as the effects of colonial duration on economic growth and income levels, have previously been studied in smaller samples by Grier (1999), Bertocchi and Canova (2002), Price (2003), Feyrer and Sacerdote (2006) and Ertan and Putterman (2008). 3 Feyrer and Sacerdote (2006) also analyze the effect of colonialism during different eras, but their dependent variable is economic development rather than democracy. Their sample of about 80 island observations many of which are islands within the same country is further very different from our cross-country sample. The general tendency in both Grier (1999) and Feyrer and Sacerdote (2006) that the duration of colonialism has been favorable for economic development, is well in line with our results of a positive effect of imperialist colonialism on democracy. The article is structured as follows: In Section 2, we present our sample of 143 colonies and the methodology used for collecting the data. In Section 3, we discuss theoretical aspects of the impact of colonialism on institutions like democracy. In Section 4, we analyze the empirical determinants of democracy and in particular how the duration of colonialism affects contemporary levels of democracy. Section 5 concludes. 2. The colony sample Previous cross-country studies on the social and economic effects of Western colonization have tended to use very different data. Table 1 gives an overview of previous studies. Most works carry out cross-country investigations and the number of observations in theses studies range from 33 British colonies in Lange (2004) to 89 colonies in Ertan and Putterman (2008) and 103 in Rodrik et al. (2004). 4 Banerjee and Iyer (2005) collect a data base on 166 Indian districts. The most original database is Feyrer and Sacerdote s (2006) use of data from 80 islands, some of which are countries (like Barbados) whereas many observations are islands within island countries (like Efate within the island country Vanuatu). 2 See Austin (2008) for a recent critical discussion of the findings in the first two works. 3 Bertocchi and Canova (2002) also recognize the very large differences between American and African colonization and therefore restrict their analysis to the relatively homogenous era of African colonization. 4 The base sample in the latter article contains 79 such countries with data on settler mortality.

3 536 O. Olsson / Journal of Comparative Economics 37 (2009) Table 1 Previously used colonial samples. Study Observations Regions AJR (2001) 64 Countries All continents Banerjee and Iyer (2005) 166 Districts Indian districts Bertocchi and Canova (2002) 38 Countries Africa Ertan and Putterman (2008) 89 Countries All continents Feyrer and Sacerdote (2006) 80 Island countries and islands Atlantic, Pacific, and Indian oceans Grier (1999) 63 Countries All continents Lange (2004) 33 Countries British colonies Lange et al. (2006) 57 Countries British and Spanish colonies Price (2003) 72 Countries Countries with a 20th century colonial experience Rodrik et al. (2004) 103 (79) Countries All continents Since our aim is to investigate the general determinants of institutional choice among all former colonies, it is of central importance to get as close to the universal sample of Western colonies as possible. To do so, we need to clarify how a colony is defined. We use the following definition, which is a modified variant of that in Osterhammel (2005, p. 10): Definition 1. A Western colony is a new and lasting political organization created outside Europe by Western countries (countries in Europe excluding Russia but including the Western offshoots United States, Australia, New Zealand, and Canada) from the 15th to the 20th centuries through either invasion and conquest, and/or settlement colonization. Its rulers are in sustained dependence on a geographically remote mother country or imperial center that claims exclusive rights of possession of the colony or in other ways strongly dominates politics in the country. Using this definition means that we restrict our sample in a number of ways (see Appendix A for a presentation of the colonial data). The time interval specified above (the modern era) means that we disregard previous events of colonization such as the Danish settlements of Iceland and Greenland or the Greek colonizations throughout the Mediterranean during antiquity. The fact that we only consider Western colonies means that we do not take into account the Japanese conquests in East Asia in the 1930s, nor the Russian acquisitions until The requirement that the colony in question must be dependent on a particular Western country implies that we exclude a number of countries in the Middle East such as Syria, Iraq, and Jordan which were ruled by Western countries in the wake of World War I on a mandate from the League of Nations. We also exclude Ethiopia, the only country in Africa that was never a colony. 5 Most colonial powers used several different types of colonialism. One of the more important distinctions was between colonies and protectorates. Full colonies were often possessions in the full meaning of the word. Algeria and other French colonies were indeed considered to be parts of France. Protectorates, on the other hand, were generally more loosely tied to the mother country. For instance, British protectorates like Bhutan and Qatar were at least nominally still independent but typically had to concede substantial power to the British, such as the handling of foreign affairs and the right to deploy troops in the country. In line with most of the literature, we treat all protectorates as colonies. Using the definition above, we have identified 143 former colonies in the world that are now sovereign states or still dependencies and that have entries in the World Bank statistics as countries. 6 The sample includes all countries in North, Central, and South America, all countries in Africa except Ethiopia, all countries in South Asia except Thailand, most Pacific islands, only a few small countries in the Middle East (Bahrain, Kuwait, Qatar, United Arab Emirates, and Yemen), and no countries in Northern or Central Asia (except Bhutan). Some of the countries in our sample are very small and not normally included in cross-country macroeconomic studies. The smallest countries in our sample in terms of population size for which we have any data on institutional quality include Anguilla (13,500 individuals), Palau (21,000), Cayman islands (39,000), and the Caribbean island group Saint Kitts and Nevis (46,000). We have also tried to determine dates of colonization and independence for all colonies in the sample, and Appendix A lists the major event for each country that motivates using the particular year stated as the date of colonization. Whereas the year of independence is usually quite straightforward, the onset of colonization is often more difficult to determine. For the very important colony of India (including Pakistan and Bangladesh), we have chosen the year 1750 when the military campaigns of Robert Clive made the East India Company the strongest power on the Indian peninsula. However, the Portuguese had established trading posts already in early sixteenth century and the country did not become a crown colony until The colonies in West Africa are particularly hard to decide on since hundreds of years passed between the first contact with Europeans in the fifteenth century and the great Scramble in the 1880s. We have tried to stay close to our definition of a colony when determining the date of colonization. In particular, we have tried to identify a date when Western colonizers became the major political power in the region. This date is sometimes hundreds of years before the formal declaration of colony status, which some previous authors have used. 5 Italy occupied the country during , but this did not result in a lasting colonial administration. Bertocchi and Canova also exclude Liberia, but after close consideration we decided that its 23-year period of American domination until independence in 1847 qualifies it to be regarded as a colony. 6 Our sources in this data collection have been Britannica (2006), CIA (2006), and Nationalencyklopedin (2006).

4 O. Olsson / Journal of Comparative Economics 37 (2009) Year of colonization GNB CPV URY AGO BOL PHL ARGPRY CHL COL ECU PER BRA VEN NIC MEX GTM SLV HND MOZ PAN CRI BRB USA REU JAM HTI PAK IND CAN AUS SYC MUS LKAIDN GUY NER CAF MRT MDG KEN MLI SWZ TCD BDI RWA EGY ZAR BWA MWI UGA GINTUN TGO TZA ZWE ZMB COG LSO BEN NGA GAB NZL HKG DZA CIV SGPGMB SLE Year of colonization in Grier (1999) Fig. 1. Comparison of years of colonization with Grier (1999). SEN MYS GHA To illustrate our methodology, let us briefly discuss the case of Ghana, encompassing the area that was known as the Gold Coast in colonial times. This part of the African Atlantic coast was penetrated very early by Europeans due to the excellent opportunities for trade in gold and slaves. Already in 1482, the Portuguese established Elmina Castle on the coast in order to defend their trade monopoly. In later centuries, the Portuguese were followed by British, Dutch, Danish, Swedish, and Prussian colonizers who established forts and trading posts on the same coast. Although this colonization did not reach far into the interior, the European presence still had a major impact on the political situation in the area. Trade flows, which had previously been directed towards the northeast, were now directed towards the coast and in this new economic situation, new and more aggressive empires like that of the Ashanti emerged that were often motivated by the capture of slaves in their dealings with other tribes. 7 The Gold Coast was not officially declared a British colony until The major upheaval caused by the arrival of the Europeans still made us choose 1482 as the onset of colonization. In a similar manner, some other West African colonies have early dates (Cape Verde 1462, Sao Tome and Principe 1522, Senegal 1638, Equatorial Guinea 1778, Sierra Leone 1808, and Gambia 1816). In Fig. 1, we compare the dates of colonization in our sample with those in Grier (1999), a sample that is about half the size of our sample (72 vs. 143). The Spearman correlation coefficient is 0.80 and the largest divergences between the two samples concern the dating of colonization in Guinea-Bissau (Grier 1446, Olsson 1879), Ghana (Grier 1898, Olsson 1482), and Malaysia (Grier 1895, Olsson 1511). In the empirical section, we include the dates of colonization in Grier (1999) and Ertan and Putterman (2008) in order to show that the differences between the samples do not drive our main results. 8 Regardless of the method chosen for dating major events of colonization, it is quite clear that Western colonialism is a highly heterogeneous process spanning more than five centuries. Fig. 2 shows the dates of colonization and independence for the 143 countries in our sample. The oldest colony in our sample is Cape Verde, colonized by the Portuguese already in 1462, whereas the most recently created colony is Niger in Saharan African, not colonized in accordance with our definition until The first country to be decolonized was the United States in 1776 whereas 17 countries, including for instance Puerto Rico, Martinique, Guam, and French Polynesia, are still not sovereign nations. Visual inspection of Fig. 2 suggests that there are two major clusters of similar colonial experiences. The first cluster in the lower-left corner shows colonies in South and Central America and in the Caribbean, created by the Spanish but also the Portuguese from 1492 onwards and decolonized around The second, larger cluster in the upper-right corner has its core among African countries colonized in the late nineteenth century and decolonized around Fig. 3 puts the time distribution of new colony formation in focus. The figure largely conforms to the standard narrative about the different colonial eras. The first wave of Spanish and Portuguese colonization effort is reflected in the first peak in Fig. 3. Between 1502 and 1537, 22 new colonies were formed in the new world and some other places (Mocambique 1505, Malaysia 1511, and Sao Tomé and Principe 1522). The mature part of the mercantilist phase also included the establishment 7 See Nunn (2008) for an account of how the slave trade affected West Africa s political history. 8 The correlation with the dates of colonization for 82 colonies in Ertan and Putterman (2008) is roughly 0.89.

5 538 O. Olsson / Journal of Comparative Economics 37 (2009) ABW PRI ANT BLZ CPV MOZSTP GHA JAM MYS VIR VGB GUM AGO GUY TTO BMU GLP MTQ GUF AIA REUCYM TCA KNA ETM BRB BHS GRD LCA FSM DMA ATG SUR SEN IDN LKA MUS SYC VCT GNQ PAK IND BGD PYF NCL ASM HKG MAC NAM PCI MHL ERI BRN TUV KIRVUT NIUCOMDJI PNG QTR BWA TON COG SOM UGA MLI MDG BFA KENKUW MAR NER MMR LAO SDN TCD CAF BDI SAM RWA MRT SWZ TUN GIN CMR ZAR TGO TZA MDV NRU UAE LSO FJI GNB SLB ZWE YMN BHR SLE GMB SGP COK CIV DZA GAB NGA BEN KHM ZMB MWI BHU LBY VNM Year of independence CUB PHL DOM CRI PAN MEX GTM VEN SLV HND NIC BOL COL PER BRA ECU ARG CHL PRY CAN ZAF HTI URY AUS LIB NZL EGY USA Year of colonization Fig. 2. Dates of colonization and independence for 143 colonies New colonies Fig. 3. Time distribution of new colony formation among 143 former colonies, Note: The columns show the number of new colonies formed during a particular decade. Year of the Caribbean plantation economy around 1640 (Osterhammel, 2005). As Fig. 3 shows, the time period was also a period of intense colonization, mainly in the Caribbean and mainly by French and British colonizers. Around 1750, the British East India Company consolidated their influence over the Indian provinces including Pakistan and Bangladesh. Apart from this important development, not much happened in terms of new colony formation. Colonization activity once again started to increase as the nineteenth century progressed. However, as can be inferred from Fig. 3, the great new wave did not start until During only two decades, 40 new colonies were formed, the great majority (25) in Africa. The imperialist race for the African continent started and received its basic ground rules in the infamous Berlin conference of A relatively brief but intense colonial epoch then proceeded during which the majority of the world s 9 See for instance Pakenham (1991) for an account of these events.

6 O. Olsson / Journal of Comparative Economics 37 (2009) population lived in colonies. Massive decolonization then followed in the wake of World War II when 98 countries in our sample attained full independence (see Fig. 2). 3. Colonialism and democracy The main explanatory variables in the empirical analysis below is duration of colonial rule and the number of years since independence from colonial rule. We regard duration of colonial rule as a proxy for the intensity of Western influence and the number of years since independence as an indicator of post-colonial nation-building efforts. Let us further make a rudimentary definition of democracy as a form of government where broad segments of society have access to political power and enjoy generally recognized liberties and rights. What hypotheses can we make about how the intensity of Western influence affects current levels of democracy? A naive hypothesis might suggest that any extensive experience of Western colonialism would be conducive to democracy today. After all, democracy had its main origins in Europe, and although democracy in the sense of political participation by a broad segment of society was absent during most of European history, there was still an important cultural heritage from ancient Athens and the Roman republic that persisted in European political philosophy. During the late Middle Ages, several monarchs were politically dependent on support from representatives from other social classes. Even by the time of the early Spanish expansion into America, the Cortes of León and Castile had a long history as a parliament-like institution that had certain powers over matters like taxation. 10 According to this line of reasoning, it might be conjectured that colonialism created an awareness of and an openness to Western ideas like democracy that would not have emerged without Western influence. An obvious objection to such a hypothesis would be that internal levels of democracy displayed a great degree of variation across European countries during the colonial era. It is widely recognized that Britain and the Netherlands had stronger constraints against the executive already during medieval times than Spain and France (AJR, 2005). According to Lange et al. (2006), there were further large differences in the colonial strategies of the European powers, most notably between the Spanish mercantilist policy of resource extraction in populous and wealthy areas and the British liberal policy of promoting property rights, free trade and capitalism in areas with a relatively less advanced pre-colonial development. Whereas Spanish mercantilism tended to lead to hierarchical societies with highly concentrated political power, British market-orientation instead gave rise to more equal societies that provided a more fruitful ground for democratic ideas. Hence, one might hypothesize that duration of colonial rule under Britain would lead to more democracy than colonial rule under Spain. Another objection to the naive theory of a positive Western democratic influence would be that in particular the British tended to adapt colonial policy to local circumstances. As shown by Lange (2004) and Osterhammel (2005), the British empire displayed a great variety in their organization of colonies, ranging from the frequent policy of indirect rule in Africa (where local chiefs were given a large autonomy and where Western practices were not extensively adopted) to settler colonies like in United States and Australia (where immigrant white populations almost completely replaced the native population and ran the colonies as a Neo-Europe ). As argued by Lange (2004), indirect rule proved to be bad for current institutional development in general, whereas more direct forms of colonialism led to greater state capacity and equality before the law. The policies eventually chosen by the colonists would to a large extent depend on factors like geography and natural resource abundance (Sokoloff and Engerman, 2000), existing levels of economic development and population density (AJR, 2002), as well as on the disease environment (AJR, 2001). A key argument in this paper is that it might not only be the national identity of the colonizer, geography, disease, and population density that mattered for the choice of colonial policy but also when the colonial enterprise took place. As shown by AJR (2005), all European countries were primarily autocratic by 1500 AD. At the dawn of modernity around , all countries, including Spain, had become far more liberal than previously. We argue that one might indeed divide the colonial era into two main periods; the mercantilist and the imperialist. There are a number of reasons for this division. Firstly, Figs. 2 and 3, as well as our discussion above, seem to suggest that we can distinguish between a mercantilist era with active colonization lasting perhaps until 1715 when Mauritius is colonized and ending around 1820 with the independence of most South American colonies, and a later imperialist wave reaching its peak in Secondly, as described by Curtin (1989, 1998), the period was a period of rapid innovation in tropical medicine, manifested above all in the invention of quinine. It might even be argued that it was the new tropical medicine that made the scramble for Africa possible around 1880 and thereby revolutionized colonial policy. 11 Thirdly, the colonists incentives and choice sets were clearly very different during the two eras. Our reference to a mercantilist and an imperialist era is suggestive in this regard. The Spanish and Portuguese colonization efforts with their peak in the first half of the sixteenth century were largely driven by the desire to capture precious metals (in America) and to gain monopoly positions in the lucrative spice trade (in Asia) (Landes, 1998; Lange et al., 2006). For both the Spanish and the Portuguese, the conquests of America and parts of Asia were further seen as a continuation of the preceding reconquista of 10 Throughout most of the era of the Spanish empire, the powers of the Cortes were however successfully limited by autocratic monarchs. 11 In for instance Algeria, the annual mortality among French troops fell from 81 per thousand soldiers in to 22 deaths per thousand in , implying a decrease in mortality of 73% during just two decades. The rapid decline in mortality continued ever after In French West Africa, annual mortality fell from 164 per thousand soldiers in to below 7 deaths per thousand in , i.e. a reduction by 93%. Data for British West Africa and South Africa show similar developments (Curtin, 1989; Tables 1.1 and 1.8).

7 540 O. Olsson / Journal of Comparative Economics 37 (2009) Muslim Granada (Landes, 1998). In 1519, Cortés showed the way by ruthlessly establishing the Spanish as the new rulers of the Aztec empire. Cornerstones of colonial economies during the mercantilist era were institutions like the encomienda a system of forced labor for native Indians and slavery, mainly using imported African slaves on sugar plantations. However, also the British and the Dutch wished to attain monopoly positions during this era and followed the practice of the times to develop major sugar plantation complexes in the South America and the Caribbean based on a massive import of Africa slaves (Osterhammel, 2005). Not until the later half of the seventeenth century did institutional development take off in England and in the Netherlands, although really strong capitalist institutions were probably not in place even there until the nineteenth century (North, 1990; AJR, 2005). Hence, a choice between extractive and productive institutions does not seem to have been in place during the mercantilist era. By early nineteenth century, the situation was very different. The French and American revolutions, and the independence of most American nations around 1820, had radically changed the political landscape in the Western world. The Enlightenment had brought a new way of scientific thinking based on empirical observation and a political philosophy where the equality of men was an important notion. 12 The British abolished slave trading for their nationals in 1807, a policy which greatly affected colonial policy even among the other colonizing nations. Furthermore, the Industrial Revolution fundamentally changed Western societies and strong private property rights and constraints against the executive were more or less generally accepted in the major colonial centers, as were the benefits of free trade. It is further impossible to understand the wave of colonizing efforts after 1880 without reference to power strategic and imperialist considerations and a spirit of increasing nationalistic rivalry. Colonies were often formed only to prevent other powers from colonizing. Some of the British activities in Africa might also be explained by a humanistic agenda aimed at rooting out slavery and a more or less honest Western hope of spreading civilization (Pakenham, 1991). All this strongly suggests to us that colonization during the imperialist era, regardless of the nationality of the colonizer or the particular circumstances in the colonies, should be more conducive to current levels of democracy than colonialism under mercantilism. The bottom line of this discussion is that we bring the following main hypotheses to the empirical section: First, the duration of colonialism is expected to have an overall (unconditional) positive effect on current democracy in former colonies. Second, we expect duration of colonial rule to be more beneficial for democracy in British than in Spanish colonies. Thirdly, duration of colonial rule should be more beneficial for democracy in countries colonized during the imperialist era. 4. Colonial determinants of democracy 4.1. Empirical strategy The first main equation that we estimate has the simple setup Z i ¼ a 0 þ a 1 Duration i þ a 2 Yrsindep i þ a 3 X i þ e i ð1þ where Z i is the level of democracy in 2007 in former colony i where a higher score means a stronger democracy. Duration measures time spent under colonial rule in hundreds of years, i.e. year of independence minus year of colonization, divided by 100 (see Appendix B for description and sources of all variables used). Yrsindep is time since independence in hundreds of years, whereas X i is a vector of other colonialism-related variables capturing various aspects of geography, population density, and disease environment. In line with our naive hypothesis, we predict a 1 > 0 and also that a 2 > 0. A brief note on causality is necessary. Could it be the case that Z i in some way has had a reverse casual effect on the duration of colonialism? 13 We believe that a feedback loop from current democracy to colonial duration is rather unlikely and it is unclear what direction such an effect would take. 14 In the section below, we will nonetheless briefly check the robustness of our hypotheses by employing an IV-approach. Another key issue with our empirical strategy is the concern that there might be factors that both affect democracy and colonial duration. The vector X i is included as an attempt to control for such factors and includes, for instance, natural geography (country size, latitude, islands, landlocked, disease environments, continental dummies) and long-run historical factors (population density prior to colonization and a measure of state experience), as well as current levels of wealth and openness to trade. In our choice of control variables, we have tried to follow the existing literature on colonialism. Omitted variables might of course still be an issue in this type of long-run macro analyses. We will also take into account potential problems of measurement error by using other proxies for both democracy and duration. The second main type of equation that we estimate is Z i ¼ b 0 þ b 1 Duration i þ b 2 Yrsindep i þ b 3 X i þ b 4 C i þ b 5 Duration C i þ g i ð2þ 12 Feyrer and Sacerdote (2006) contrast the purposes of Magellan s journeys in 1519 with those of Cook in 1768 and 1779 and find that whereas the spread of Christianity was an important motive for Magellan, Cook seemed to be more driven by scientific curiosity and a respect for the native people he encountered. 13 Using current income levels instead of institutional quality as their dependent variable, Feyrer and Sacerdote (2006) consider such a reverse causation mechanism and instrument colonial duration with wind patterns. They find, however, that OLS and IV estimates are more or less identical. 14 We cannot say if it is more likely that colonial powers would tend to grant independence early to colonies with an emerging democracy or if they would be inclined to keep such colonies within their empires.

8 O. Olsson / Journal of Comparative Economics 37 (2009) The important addition is the vector C i and the interaction term between C i and Duration i. C i will include dummies for colonizer identity, as well as a dummy for the time period when colonization occurs. For instance, when C i includes a dummy for the imperialist era, we could expect, in line with the discussion above, that duration of colonialism should have a more positive effect after 1850, i.e. that b 5 > 0. We are further interested in whether the inclusion of this type of interaction term has any important effects on b Main results Our main proxy for democracy in 2007 Pol2007 is taken from the well-known Polity IV-dataset collected by Marshall and Jaggers (2008). More specifically, we use their Polity2 -variable for the year 2007 which combines the scores on their measures of democracy and autocracy. A strong democracy is defined to have a system of rule where citizens can effectively express preferences for policies and leaders, where there are strong constraints against the executive, and where civil liberties and political participation are well protected. An autocracy then is characterized by a suppression of competitive political participation, weak constraints on the government, and that leaders are chosen within a small elite. The score ranges from +10 (most democratic) to 10 (least democratic). In the first category, we find for instance Australia, Mauritius, and Trinidad, whereas the least democratic country in the world in 2007 is deemed to be Qatar. The Polity2-measure extrapolates levels of democracy even during periods of state failure, which means that it is observable for all years among the 98 former colonies in our sample where Polity2 is available. As already mentioned, Duration measures the length of colonial rule from colonization to independence in hundreds of years. Cape Verde has the longest colonial duration (5.13 centuries), followed by Aruba (5.03) and Puerto Rico (4.99). The shortest colonial eras were experienced in Liberia (0.23 centuries), Bhutan (0.37), and Niger (0.38). The average duration of colonial rule among the 143 colonies is 2.04 centuries with a standard deviation of Table 2 shows the first set of regressions. In column 1, we see that duration of colonial rule is positively associated with current levels of democracy. The parameter is strongly significant and it is noteworthy that Duration alone explains 21% of the variation in Pol2007. The point estimate of 2.33 has the simple interpretation that one hundred more years of colonial duration increases Pol2007 by 2.33 units. In column 2, we introduce Yrsindep, as well as the first set of control variables: Logged GDP per capita in 2002 and an indicator of openness to trade, measured as imports plus exports as share of GDP (Openness). An important finding in the literature on the determinants of democracy is that there appears to be a clear link between political freedom and the level of economic development (Lipset, 1959; Barro, 1999). It has further been suggested that trade could lead to an improvement in the institutional quality of a country (Do and Levchenko, 2009). Yrsindep is positive and significant at the 1-percent level, whereas Openness is significant at the 5-percent level but with the wrong sign. Loggdp is insignificant. In columns 3 6, we include Polindep,the Polity2-score of the colonized country in the year of independence. Polindep might be seen as a proxy for the level of democracy during the late colonial era. The variable always has the expected sign and is significant in two out of four columns, suggesting a certain degree of institutional persistence from colonial times. In column 3, we try a battery of geographical determinants that have featured in the literature; the logged size of country territory (Log Area), an island dummy (Island), settler mortality from AJR (2001) (LogMort), and a dummy for landlockedness (Landlocked). Due to the limited number of observations for LogMort, its inclusion reduces the sample to 70 ex-colonies. Among the geographical variables, only the Island dummy is significant at the 1-percent level, as previously found by Congdon Fors (2006) and others. Being an island is associated with a Pol2007 that is 5.86 units higher than on non-islands. Larger countries further appear to be somewhat more democratic than smaller ones. It is also noteworthy that LogMort does not explain levels of democracy. When continental dummies are included in column 4, these have no explanatory power either. 15 The remarkable feature so far is the recurring positive and significant estimates of Duration and YrsIndep. These results seem to support the naive hypothesis that Western colonial influence was largely beneficial for democracy, and that a long period of independence appear to further foster mature democracies. 16 We now start to include interaction terms as in Eq. (2) to check whether Duration had a differential impact depending on the circumstances at large. In column 5, we use a variable measuring population density in 1500 AD from AJR (2002), Den1500, and interact that variable with Duration. According to AJR s (2002) reversal of fortune -hypothesis, colonists tended to install extractive and harmful institutions in countries that were relatively developed at the start of the colonizing era. Hence, one might conjecture that duration of colonialism might be less conducive to democracy in initially densely populated areas, i.e. we might expect that the interaction term was negative. It turns out that it is neither negative, nor significant. In column 6, we include a variable Statehist, capturing the extent of countries statehood experience since the year 1 AD (Putterman, 2004). A high value (close to unity) means that the country has a long history of statehood above tribal level 15 We have also tried other variables as controls, for instance measures of ethnic fractionalization from Alesina et al. (2003), levels of secondary schooling, and a variable Native from Putterman and Weil (2008), capturing the extent that the current ethnic composition of the population corresponds to the composition in 1500 AD. None of these variables turned out to be significant. Results are available upon request. 16 A referee pointed out that some colonies actually belonged to another non-european country directly after independence. For instance, Bangladesh was a part of Pakistan between 1947 and When we instead use this later date as year of independence for seven countries, the estimate for Yrsindep is roughly the same as before and significant. The seven countries are Bangladesh, Belize, East Timor, Ecuador, El Salvador, Eritrea, and Venezuela.

9 542 O. Olsson / Journal of Comparative Economics 37 (2009) Table 2 Determinants of democracy. Variables (1) (2) (3) (4) (5) (6) Pol2007 Pol2007 Pol2007 Pol2007 Pol2007 Pol2007 Duration 2.329*** (0.447) 2.009*** (0.454) 1.649*** (0.469) 1.635*** (0.456) 1.412** (0.592) 1.315*** (0.433) Yrsindep 1.571* (0.914) 3.701*** (0.781) 3.332*** (1.138) 3.585*** (0.644) 3.310*** (0.601) Polindep (0.113) 0.272*** (0.083) 0.255*** (0.091) (0.086) Openness 3.740** (1.734) Loggdp (0.720) Island 6.093*** (1.739) Logarea 0.494* (0.276) Logmort (0.485) Landlock (1.320) Africa (2.207) Samerica (1.220) Asia (2.354) Den (0.131) Duradens (0.063) Statehist 4.869** (2.046) Observations Adj. R Notes: Robust standard errors in parenthesis. All estimations done with OLS. A constant has been included in each regression but its coefficients are unreported. * p < 0.1. ** p < *** p < with indigenous rulers in power. 17 The negative and significant estimate of Statehist in column 6 implies, somewhat surprisingly, that former colonies with a long history of advanced government are more likely to be led by autocratic regimes today. 18 Despite the inclusion of all these controls, could there still be omitted variables that bias our results? One factor that comes to mind is resources and endowments in the colonized countries. It might, for instance, be the case that resource abundant countries were colonized early and for a long period, became independent early, and somehow provided a better environment for democracy. In accordance with the existing literature, we would argue that variables such as LogMort, StateHist and Den1500 serve as proxies for resources in a wide sense. Still, they are far from perfect and the potential for omitted variable bias can probably never be completely eliminated. In Table 3, we explore further the importance of the nationality of the colonizer. In column 1, both the dummies for British and Spanish colonies are negative and significant at the 5-percent level. However, when we interact Duration with the nationality dummies in column 2, we receive some interesting results. The estimates for Durbritain and Durfrance are both positive and significant at the 10-percent level, whereas the Spanish interaction term has the expected negative sign but is insignificant. Taking into account both the estimates for the nationality dummies and the interaction terms, they imply however that British colonial rule will have a net positive effect only after almost 230 years (4.855/2.123 = 2.287) and roughly the same result applies for France (2.273). Note further that b 1 is now insignificant. The natural interpretation is that the general positive effect of duration on democracy is to a great extent driven by experience of British colonial rule, and to some extent French rule. In columns 3 and 4, we introduce a dummy Post1850 for countries colonized after We chose 1850 as a cutoff point since this date coincides with the revolution in tropical medicine, and lies in between two of the defining events during the modernist/imperialist era; the American and French revolutions and the Napoleonic era on the one hand, and the scramble for Africa in the 1880s on the other. Since the interaction term is positive in column 3, it appears to give some support to our hypothesis that colonization during the imperialist era was more conducive to democracy. However, it is worth noting that the Post1850-dummy is consistently negative and significant (see also Table 4). Our interpretation is that the countries colonized after 1850 were typically not good material for developing future democracies, but that the duration of colonial rule actually made a clear positive contribution to the levels witnessed today. In column 4, lastly, we run a horse-race between the colonizer identity dummies for Britain and France and the Post1850-dummy. Interestingly, we then find that both Durbritain and Dur 1850 are positive and significant at the 10-percent level but that the estimate for Durfrance is not. 17 Former colonies with the highest score are Sri Lanka (0.85) and Cambodia (0.84), whereas the lowest scorers are Papua New Guinea (0.01), Kenya (0.01), and Central African Republic (0.01). 18 We acknowledge the possibility of a kind of reverse causality in the sense that the type of government might influence a country s success at maintaining a sovereign state. Throughout most of history, a country with persistent democratic rule would run a very high risk of being conquered by aggressive military rulers in neighboring countries and possibly even cease to be a state.

10 O. Olsson / Journal of Comparative Economics 37 (2009) Table 3 Colonial determinants of democracy. Variables (1) (2) (3) (4) Pol2007 Pol2007 Pol2007 Pol2007 Duration 1.706*** (0.453) (0.880) 1.062* (0.612) (0.962) Yrsindep 5.055*** (1.148) 4.225*** (1.392) 3.559*** (0.743) Polindep 0.316*** (0.095) 0.219** (0.085) Polcolind (0.117) Britain 3.199** (1.444) 4.855* (2.895) 5.790** (2.548) France (1.670) 5.686* (2.973) (2.966) Spain 4.919** (2.151) (7.301) Durbritain 2.123** (1.046) 1.803* (0.943) Durfrance 2.502* (1.421) (1.734) Durspain (2.511) Post * (3.622) 9.853** (3.834) Dur * (3.958) 7.701* (4.113) Constant (2.746) (2.197) 7.670*** (2.691) Observations Adj. R Notes: Robust standard errors in parenthesis. All estimations done with OLS. A constant has been included in each regression but its coefficients are unreported. * p < 0.1. ** p < *** p < Robustness In this section, we will briefly test the robustness of our main results above by addressing potential problems of measurement error in the key dependent and independent variables, sample selection bias, and reverse causality. If we start with the measurement of the dependent variable, it might be argued that choosing the Polity2-score for 2007 could be problematic since it is well known that the Polity-measures display a great degree of intertemporal variation and that 2007, for some reason, might not be a representative year for the period. We address this issue by calculating the average Polity2-score during independence for all colonies in our sample and refer to this variable as Avpol. 19 In column 1 of Table 4, we use Avpol as the dependent variable and include only Duration and Polindep as explanatory variables. Both variables are positive and highly significant and together explain 60 percent of the variation. The partial relationship between Avpol and Duration is shown in Fig. 4. When we include the full set of dummies and interaction terms in column 2, we find that only Polindep, Post1850, and Dur1850 are significant whereas b 1 is not. In columns 3 and 4, we switch dependent variable and instead use another proxy for democracy and executive constraints; Voice and Accountability in 2007 (Va07) from Kaufmann et al. (2008). This widely used database, available from the World Bank website, has the great advantage of covering a very large number of countries. Duration is positive and significant in an expanded sample of 135 former colonies in column 3, but the same pattern as before emerges when we include the dummies and interaction terms in column 4. Only the estimates for Post1850 and Dur1850 are moderately significant with the expected signs. The results in columns 2 and 4 appear to strengthen our argument from the previous section about the positive effect of imperialist colonialism on democracy. 20 In columns 5 8, we further test the sensitivity of our most robust result so far: That Duration has a general positive impact on Pol2007 when we leave out the interaction terms. In column 5, we use an adjusted measure of duration defined as Duradj ¼ Duration ð0:99 100Yrsindep Þ. The purpose of this variable transformation is to allow for a non-linear depreciation of the colonial experience after independence. The methodology implies that countries with a relatively long colonial history which happened long ago (like the United States) become comparable with countries with a relatively short colonial history that happened more recently (like Egypt). 21 In the simple bivariate regression in column 5, Duradj is significant at the 5-percent level. In order to check for potential measurement error effects, we try two other Duration-samples in the literature as independent variables: DurGrier from Grier (1999) and DurErtan from Ertan and Putterman (2008). Despite the somewhat different codings of dates of colonization, both variables in columns 6 and 7 have positive and significant estimates, which confirms the tendency shown before. 19 Indeed, the correlation with Pol2007 is far from perfect; the Spearman correlation coefficient is We have also experimented with using two other cut-off dates for the imperialist era 1830 and 1870 and then running two separate regressions as in Table 4, column 2. The estimates for Duration were then insignificant whereas the interaction terms Dur1830 and Dur 1870 were both positive and significant at the 10-percent level. The dummies Post1830 and Post1870 were both negative and significant at the 10- and 1-percent levels, respectively. Results are available upon request. 21 This idea of treating colonial experience as a stock variable that is depreciated by non-colonial years is inspired by the methodology in Persson and Tabellini (in press) where a democratic capital is depreciated by years of autocracy. The choice of a 1-percent depreciation rate is arbitrary.