From Bad Institutions to Worse: The Role of History in Development

Joint with: Rui Zhao

This paper examines how policy implemented at an economy's agrarian development stage to protect the vested interests of landowners affects a country's subsequent development. We find such a policy negatively impacts an economy's development path in two ways. First, it delays the formation of industry. Second, it facilitates the formation of industry insider groups that further slow down the growth process by delaying the adoption of better tech-nology and by limiting the use of better technology. We provide support for the theory by comparing the development experiences of the United States and Latin American.

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