SOME COUNTRIES PRODUCE SO MUCH MORE OUTPUT PER WORKER THAN OTHERS: Instruments

flow3d_schulungen_01
Our choice of instruments considers several centuries of world history. One of the key features of the 16th through 19th centuries was the expansion of Western European influence around the world. The extent of this influence was far from uniform, and thus provides us with identifying variation which we will take to be exogenous. Our instruments are various correlates of the extent of Western European influence. These are characteristics of geography such as distance from the equator and the extent to which the primary languages of Western Europe — English, French, German, Portuguese, and Spanish — are spoken as first languages today.


Our instruments are positively correlated with social infrastructure. Western Europe discovered the ideas of Adam Smith, the importance of property rights, and the system of checks and balances in government, and the countries that were strongly influenced by Western Europe were, other things equal, more likely to adopt favorable infrastructure.

That the extent to which the languages of Western Europe are spoken as a mother tongue is correlated with the extent of Western European influence seems perfectly natural. However, one may wonder about the correlation of distance from the equator with Western European influence. We suggest this is plausible for two reasons. First, Western Europeans were more likely to migrate to and settle regions of the world that were sparsely populated at the start of the 15th century. Regions such as the United States, Canada, Australia, New Zealand, and Argentina appear to satisfy this criterion. Second, it appears that Western Europeans were more likely to settle in areas that were broadly similar in climate to Western Europe, which again points to regions far from the equator.