Post-communist countries offer new evidence on the relative importance of courts and relationships in enforcing contracts. Belief in the effectiveness of courts has a significant positive effect on the level of trust shown in new relationships between firms and their customers. Well-functioning...

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...

This paper develops the empirical and theoretical case that differences in economic institutions are the fundamental cause of differences in economic development. We first document the empirical importance of institutions by focusing on two 'quasi-natural experiments' in history, the division of...

This paper documents that the Rise of (Western) Europe between 1500 and 1850 is largely accounted for by the growth of European nations with access to the Atlantic, and especially by those nations that engaged in colonialism and long distance oceanic trade. Moreover, Atlantic ports grew much...

Among countries colonized by European powers during the past 500 years those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanization patterns and population density, which, we argue, proxy for economic prosperity. This reversal is...

We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross-country correlation between income and democracy, but do not typically control for factors that simultaneously affect...

The conventional wisdom views high levels of education as a prerequisite for democracy. This paper shows that existing evidence for this view is based on cross-sectional correlations, which disappear once we look at within-country variation. In other words, there is no evidence that countries...

Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available....

We exploit differences in the mortality rates faced by European colonialists to estimate the effect of institutions on economic performance. Our argument is that Europeans adopted very different colonization policies in different colonies, with different associated institutions. The choice of...