Factor Endowments, Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States.

NBER Historical Paper No. 66 December 1994

Many scholars are concerned with why the United States and Canada have been so much more successful over time than other New World economies. Since all New World societies enjoyed high levels of product per capita early in their histories, the divergence must stem from the achievement of sustained economic growth by the United States and Canada during the eighteenth and early nineteenth centuries, while the others did not manage to attain this goal until the late nineteenth or twentieth centuries. Although many explanations have been offered, this paper highlights the relevance of substantial differences in the degree of inequality in wealth, human capital, and political power in accounting for the variation in the records of growth. Moreover, we suggest that the roots of these disparities in inequality lay in differences in the initial factor endowments of the respective colonies. Of particular significance were the suitability of the country for the cultivation of sugar and other crops, in which there were economies of production in the use of slaves, and the presence of large concentrations of Native Americans. Both of these conditions encouraged the evolution of societies in which relatively small elites of European descent could hold highly disproportionate shares of the wealth, human capital, and political power - and establish economic and political...