TY  - JOUR
AU  - Acemoglu,Daron
AU  - Johnson,Simon
TI  - Unbundling Institutions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9934
PY  - 2003
Y2  - September 2003
UR  - http://www.nber.org/papers/w9934
L1  - http://www.nber.org/papers/w9934.pdf
N1  - Author contact info:
Daron Acemoglu
Department of Economics
MIT, E52-380B
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/253-1927
Fax: 617/253-1330
E-Mail: daron@mit.edu

Simon Johnson
MIT Sloan School of Management
100 Main Street, E52-562
Cambridge, MA 02142
Tel: 617/290-9618
Fax: 617/253-2660
E-Mail: sjohnson@mit.edu
AB  - This paper evaluates the importance of  property rights institutions', which protect citizens against expropriation by the government and powerful elites, and  contracting institutions', which enable private contracts between citizens. We exploit exogenous variation in both types of institutions driven by colonial history, and document strong first-stage relationships between property rights institutions and the determinants of European colonization (settler mortality and population density before colonization), and between contracting institutions and the identity of the colonizing power. Using this instrumental variables strategy, we find that property rights institutions have a first-order effect on long-run economic growth, investment, and financial development. Contracting institutions appear to matter only for the form of financial intermediation. A possible interpretation for this pattern is that individuals often find ways of altering the terms of their formal and informal contracts to avoid the adverse effects of contracting institutions but are unable to do so against the risk of expropriation.
ER  -