American Economic Review: Vol. 95 No. 4 (September 2005)
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History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India
Banerjee, Abhijit, and Lakshmi Iyer. 2005. "History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India." American Economic Review, 95(4): 1190-1213.
We analyze the colonial land revenue institutions set up by the British in India, and show that differences in historical property rights institutions lead to sustained differences in economic outcomes. Areas in which proprietary rights in land were historically given to landlords have significantly lower agricultural investments and productivity in the post-independence period than areas in which these rights were given to the cultivators. These areas also have significantly lower investments in health and education. These differences are not driven by omitted variables or endogeneity problems; they probably arise because differences in historical institutions lead to very different policy choices.
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