| Abstract: |
Why is underdevelopment so persistent? One explanation is that poor countries
do not have institutions that can support growth. Because institutions (both
good and bad) are persistent, underdevelopment is persistent. An alternative
view is that underdevelopment comes from poor education. Neither explanation
is fully satisfactory, the first because it does not explain why poor economic
institutions persist even in fairly democratic but poor societies, and the
second because it does not explain why poor education is so persistent. This
paper tries to reconcile these two views by arguing that the underlying cause
of underdevelopment is the initial distribution of factor endowments. Under
certain circumstances, this leads to self-interested constituencies that, in
equilibrium, perpetuate the status quo. In other words, poor education policy
might well be the proximate cause of underdevelopment, but the deeper (and
more long lasting cause) are the initial conditions (like the initial
distribution of education) that determine political constituencies, their
power, and their incentives. Though the initial conditions may well be a
legacy of the colonial past, and may well create a perverse political
equilibrium of stagnation, persistence does not require the presence of
coercive political institutions. We present some suggestive empirical
evidence. On the one hand, such an analysis offers hope that the destiny of
societies is not preordained by the institutions they inherited through
historical accident. On the other hand, it suggests we need to understand
better how to alter factor endowments when societies may not have the internal
will to do so. |