Category Archives: Analytical Narratives

Where is the growth?

Mismeasuring Long Run Growth: The Bias from Spliced National Accounts

by Leandro Prados de la Escosura (Carlos III)

Abstract: Comparisons of economic performance over space and time largely depend on how statistical evidence from national accounts and historical estimates are spliced. To allow for changes in relative prices, GDP benchmark years in national accounts are periodically replaced with new and more recent ones. Thus, a homogeneous long-run GDP series requires linking different temporal segments of national accounts. The choice of the splicing procedure may result in substantial differences in GDP levels and growth, particularly as an economy undergoes deep structural transformation. An inadequate splicing may result in a serious bias in the measurement of GDP levels and growth rates.

Alternative splicing solutions are discussed in this paper for the particular case of Spain, a fast growing country in the second half of the twentieth century. It is concluded that the usual linking procedure, retropolation, has serious flows as it tends to bias GDP levels upwards and, consequently, to underestimate growth rates, especially for developing countries experiencing structural change. An alternative interpolation procedure is proposed.


Distributed in NEP-HIS on 2015 – 01 – 09

Reviewed by Cristián Ducoing

Dealing with National Accounts (hereafter NA) is a hard; dealing with NA in the long run is even harder…..

Broadly speaking, a quick and ready comparison of economic performance for a period of sixty years or more, would typically source its data from the Maddison project. However and as with any other human endevour, this data is not free from error. Potential and actual errors in measuring economic growth is highly relevant economic history research, particularly if we want to improve its public policy impact. See for instance the (brief) discussion in Xavier Marquez’s blog around how the choice of measure can significantly under or overstate importance of Lee Kuan Yew as ruler of Singapore.

The paper by Leandro Prados de la Escosura, therefore, contributes to a growing debate around establishing which is the “best” GDP measure to ascertain economic performance in the long run (i.e. 60 or more years). For some time now Prados de la Escosura has been searching for new ways to measure economic development in the long run. This body of work is now made out of over 60 articles in peer reviewed journals, book chapters and academic books. In this paper, the latest addition to assessing welfare levels in the long run, Prados de la Escosura discusses the problems in using alternative benchmarks and issues of spliced NA in a country with a notorious structural change, Spain. The main hypothesis developed in this article is to ascertain differences that could appear in the long run NA according to the method used to splice NA benchmarks. So, the BIG question is retropolation or interpolation?

Leandro Prados de la Escosura. Source:

Leandro Prados de la Escosura. Source:

Retropolation: As Prados de la Escosura says, involves a method that is …, widely used by national accountants (and implicitly accepted in international comparisons). [T]he backward projection, or retropolation, approach, accepts the reference level provided by the most recent benchmark estimate…. In other words, the researcher accepts the current benchmark and splits it with the past series (using the variation rates of the past estimations). What is the issue here? Selecting the most recent benchmark results in a higher GDP estimate because, by its nature, this benchmark encompasses a greater number of economic activities. For instance, the ranking of relative income for the UK and France changes significantly when including estimates of prostitution and narcotrafic. This “weird” example shows how with a higher current level and using past variation rates, long-run estimates of GDP will be artificially improved in value. This approach thus can lead us to find historical anomalies such as a richer Spain overtaking France in the XIXth century (See Prados de la Escosura figure 3 below).

An alternative to the backward projection linkage is the interpolation procedure. This method accepts the levels computed directly for each benchmark year as the best possible estimates, on the grounds that they have been obtained with ”complete” information on quantities and prices in the earlier period. This procedure keeps the initial level unaltered, probably being lower than the level estimated by the retropolation approach.

There are two more recent methods to splice NA series derived from the methods described above: the “mixed splicing” proposed by Angel de la Fuente (2014), which uses a parameter to capture the severity of the initial error in the original benchmark. The problem with this solution is the arbitrary value assigned (parameter). Let’s see it graphically and using data for the Maddison project. As it is well known, these figures were recently updated by Jutta Bolt and Jan Luiten van Zanden while the database built thanks to the contributions of several scholars around the world and using a same currency (i.e. the international Geary-Kheamy dollar) to measure NA. Now, in figure 1 shows a plot of GDP per capita of France, UK, USA and Spain using data from the Madison project.

GDP per capita $G-K 1990. France, UK, USA and Spain. 1850 – 2012

The graph suggests that Spain was always poorer than France. But this could change if the chosen method to split NA is the retropolation approach. Probably we need a graph just with France to appreciate the differences. Please see figure 2:

GDP pc Ratio between Spain and France. Bolt&vanZanden (2014) with data from Prados de la Escosura (2003)

GDP pc Ratio between Spain and France. Bolt&vanZanden (2014) with data from Prados de la Escosura (2003)

Figure 2 now suggests an apparent convergence of Spain with France in the period 1957 to 2006. The average growth rate for Spain in this period was almost 3,5% p.a. and in the case of France average growth shrinks to 2,2% p.a. Anecdotal observation as well as documented evidence around Spainish levels of inequality and poverty make this result hard to believe. Prados de la Escosura goes on to help us ascertain this differences in measurement graphically by brining together estimates of retropolation and interpolation approaches in a single graph (see figure 3 below):

Figure 3. Spain’s Comparative Real Per Capita GDP with Alternative Linear Splicing (2011 EKS $) (logs).

Figure 3. Spain’s Comparative Real Per Capita GDP with Alternative Linear Splicing (2011 EKS $) (logs).

In summary, this paper by Prados de la Escosura is a great contribution to the debate on long run economic performance. It poises interesting challenges scholars researching long-term growth and dealing with NA and international comparisons. The benchmarks and split between different sources is always a source of problems to international comparative studies but also to long-term study of the same country. Moving beyond the technical implications discussed by Prados de la Escosura in this paper, economic history research could benefit from a debate to look for alternative measures or proxies for long-run growth, because GDP as the main source of international comparisons is becoming “dated” and ineffective to deal with new research in inequality, genuine savings Genuine Savings, energy consumption, complexity and gaps between development and developed countries to name but a few.


Bolt, J. and J. L. van Zanden (2014). The Maddison Project: collaborative research on historical national accounts. The Economic History Review, 67 (3): 627–651.

Prados de la Escosura, Leandro  (2003) El progreso económico de España (1850-2000). Madrid, Fundación BBVA, , 762 pp.


1) This paper by Prados de la Escosura has already been published in Cliometrica and with the same title

2) Prados de la Escosura’s A new historical database on economic freedom in OECD countries | VOX, CEPR’s Policy Portal.


#Productivity, #Employment and #Structural Change in #Developing Countries

Patterns of Structural Change in Developing Countries

by Marcel Timmer (University of Groningen), Gaaitzen de Vries (University of Groningen), Klaas de Vries (The Conference Board, Brussels)

Abstract This paper introduces the updated and extended Groningen Growth and Development Centre (GGDC) 10-Sector database. The database includes annual time series of value added and persons employed for ten broad sectors of the economy from 1950 onwards. It now includes eleven countries in Asia (China has been added compared to the previous release), nine in Latin America and eleven in Sub-Saharan Africa. We use the GGDC 10- Sector database to document patterns of structural change in developing countries. We find that the expansion of manufacturing activities during the early post World War II period was related to a growth-enhancing reallocation of resources in most countries in Asia, Africa and Latin America. This process of structural change stalled in many African and Latin American countries during the mid-1970s and 1980s. When growth rebounded in the 1990s, workers mainly relocated to market services industries, such as retail trade and distribution. Though such services have higher productivity than much of agriculture, they are not technologically dynamic and have been falling behind the world frontier.


Review by Sebastian Fleitas

As economies evolve and develop tremendous changes in the composition of goods and services take place. For instance, by start of World War II, one in three workers in the United States were employed in manufacturing and agriculture. A steady shift towards the service sectors since then, means that today manufacturing and agriculture only employ approximately one in eight workers. These structural changes imply the reallocation of resources and particularly labor across sectors with different productivity levels. The rate and intensity of these process has important impact on economic growth. Structural changes, therefore, have important implications for economies mainly because of three factors:

a) technological changes occur at different paces for different goods,

b) there are different patterns of demand for different goods, and

c) relative prices in the world economy do not fully reflect relative marginal productivities and marginal utilities among goods.

Industrialised nations have, generally speaking, closely followed the United States in increasing the weight of the service sector since the 1980s (if not before). It is also widely known that during the same period, recently industrialised nations such as Brazil, Mexico China, Korea or other Asian Tigers expanded employment in their domestic manufacturing sector at the same time as their GDP was increasing. But what happened with the rest of the world? The short answer is that it is remarkable how little we know about the process in the rest of the world.

Structural Change in the US Economy (taken from The Atlantic

Structural Change in the US Economy (taken from The Atlantic

In the paper distributed by NEP-HIS 2014-09-25, Timmer, Vries and Vries describe similarities and differences in the patterns of structural change across developing countries in Asia, Africa, and Latin America since the 1950s. In order to do that, Timmer and colleagues created, updated and (more than once) expanded the Groningen Growth and Development Centre (GGDC) Sector database. This database includes data from 1950 onwards on value added and persons employed for ten broad sectors of the economy for a group of countries. In its current version, the database includes eleven Asian countries (with the good news that China is now included!), nine Latin American countries, and eleven from Sub-Saharan Africa.

There are some important stylized facts that can be learned from the paper. First, since the 1950s workers relocated from agriculture into the manufacturing and to a lesser extent the (formal and informal) services sectors. Second, employment in manufacturing grew in the 1960s and early 1970s in the three continents. These changes responded to policies through which individual countries pursued to promote industry development. Along the same lines, an result from the study by Timmer and colleagues is that there has been a clear decline of the manufacturing employment share in Africa and Latin America since the mid 1970s while production and employment increasingly originate from services activities. In 2010, only 7 percent of the African and 12 percent of the Latin American workforce was employed in manufacturing. These figures contrast with what happened in Asia, where the share of manufacturing in value-added was on average 20 percent of GDP for the same year.

According to the productivity measures by Trimmer et al., the gaps for developing countries are still huge and increasing for most countries. On one hand, the authors find that labor productivity in agriculture is much lower compared to services and even lower in relation to manufacturing. In 2010, for example, the agricultural value added share in Africa was 22 percent, while the employment share was 51 percent. This suggests agricultural labor productivity is about half of that of the average in the economy. In contrast, the services value added share was 50 percent while the employment share was 37 percent, and the shares for manufacturing are 10% and 7% respectively. On the other hand, productivity levels in manufacturing and market services have been falling behind the technology frontier (US in this paper) in Latin America and Africa, and they have been increasing (at a lower rate than I would expect, though) in Asia.

Word Cloud of the introduction of the paper (made using

Word Cloud of the introduction of the paper (made using

Finally, Timmer et al. follow Fabricant (1942) in decomposing the change of productivity in three factors namely:

a) the change in productivity of the sector holding the share of employment fixed (within-effect),

b) the change of employment in sectors with different productivity holding the productivity fixed (static-effect), and

c) the effects of the interaction between the changes in sector productivity and employment share per sector (dynamic effect).

Their results suggest that the within-effect as well as the static reallocation effect are both positive. However, the authors find that the dynamic effect is substantially negative in Africa and Latin America suggesting the reallocation of employment to sectors (services) where the productivity increase is lower. In other words, this fact suggests that the marginal productivity of additional workers in these expanding sectors was below the productivity of existing activities.

this_is_file_name_1700The paper has two main contributions. First, it is hard to stress enough how valuable the contribution of these authors is of constructing this new database. This task is not always valued at its worth. Creating a new database from different sources takes a large amount of work in order to achieve the consistency of concepts and definitions used in various primary data sources. Thanks to the authors, these data and documentation are now freely and publicly available online and it encourages us to continue the study of these issues. Second, the authors focus on the comparison of the productivity among these developing countries with the productivity of the technological leaders. This is the main point in this literature given that we still observe dynamic losses of relative productivity in many countries. The main challenge in order to make productivity comparisons is how to convert real value added into common currency units. To do this, the authors use this database and combine it with previous work or their own (mainly Inklaar and Timmer, 2013) to construct sector specific purchase power parity (PPP) prices. In their comparisons, they use United States as the frontier country and measure labor productivity relative to the frontier using the sector-specific PPPs.


1171bwcThe bottom line of the paper is that most of these developing countries have failed to generate dynamic increases in relative productivity since they reallocated workers into the sectors where productivity grows at a lower rate. Thus, the main challenges are to reallocate excess agricultural workers if they exist, and to increase the productivity in the manufacturing and services sectors. With the agricultural and (sometimes) manufacturing sectors shrinking in their employment share, the relative dynamic productivity performance of the sectors where these workers are going to locate is the crucial part of the process of convergence. The decomposition of the economies in ten sectors provides a necessary step to understand the process of structural change and its effects on productivity. However, the change in the composition of what a country produces is a result of changes at the firm level in particular markets. This stresses the need for more studies at the firm level on the determinants of the productivity relative to the frontier by sector. This is even more important in the services sector where the evidence seems to suggest the existence of a duality, where some services have a high productivity level and others are informal activities with very low productivity that just hide unemployment.

In sum, this paper adds to other excellent previous work from the same authors and gives us the big picture of structural change over the last 60 years for a larger set of developing countries. In addition, the authors have made available a new database that, combined with other data sources, can help to answer important development questions. As usual, we have made progress but still more work is needed to understand the key topic of structural change. This knowledge is necessary to implement policies that boost the productivity of firms in developing countries and, therefore, to improve the standard of living of their populations.

Constructing Contemporary (Mexican Banking) History

Bank Nationalisation, Privatisation, Crisis and Financial Rescue: Using Testimonials to Write Contemporary Mexican Banking History

By Enrique Cárdenas (Centro de Estudios Espinosa Yglesias)

Abstract – The Mexican banking system has experienced a large number of transformations during the last 30 years. Although important regulatory changes were introduced in the 1970s, all but a couple of the commercial banks were nationalized in 1982, consolidated into 18 institutions and these were re-privatized in 1992. Shortly after, a balance of payments crisis in 1995 (i.e. Tequila effect) led the government to mount a financial rescue of the banking system which, in turn, resulted in foreign capital controlling all but a couple of institutions. Each and every one of these events was highly disruptive for Mexico’s productive capacity and society as a whole as their consequences have had long lasting effects on politics, regulation and supervision of the financial sector as well as polarising society. Not surprisingly the contemporary narrative accompanying these events has been highly controversial and full of conflicting accounts, with competing versions of events resulting in a long list of misconceptions and “urban legends”.

URL (Podcast: 07 April 2014, 1 hr and 38 min)

Review by Bernardo Bátiz-Lazo

This entry departs from our usual as it fails to discuss a specific paper circulated by NEP-HIS. Instead I comment and reflect on a public lecture, that is, another common medium we use to communicate our research. The lecture build around two multi volume books and three DVD’s, and was delivered by Enrique Cárdenas (Executive Director of Centro de Estudios Espinosa Yglesias or CEEY) at Bangor Business School’s London campus on 2014-04-07. The actual publications are available, by the way, in hard copy from CEEY’s book store and in electronic version from, as well as following the links to videos below and the link to the full podcast of the presentation above.

The chief aim of this project is to offer new evidence on the process of nationalisation (1982) and privatisation (1991-1992) of Mexican commercial banks. These two episodes of contemporary financial history had important rippling effect on Mexican society, politics and macroeconomic performance. They also had global consequences, first, as they mark the start of the so-called “International Debt Crisis” after Mexico informed of a payment moratorium of sovereign debt in August 1982. Secondly, the ratification of Robert Rubin as the 70th US Treasury Secretary (1995-1999) together with Ernesto Zedillo taking office as 54th President of Mexico (1994-2000), led to a political power vacuum and impasse in economic policy making between the Autumn of 1994 and early Winter of 1995. Known in the vernacular as the “Tequila Crisis”, in December 1994 Mexico devalued its currency and this led to instability in international foreign exchange markets and accelerated the exit of portfolio investments from a number of other countries (most notably Argentina and Brazil). By this point in time, Mexicans had fought hard during negotiations with the US and Canada to keep the banking system out of the North American Free Trade Agreement (NAFTA). But this exception was lost in the aftermath of the “Tequila Crisis” while the subsequent bailout of the newly privatised banks represented a precedent missed by US and British regulators of what would happen, on a much bigger scale, during the 2007-9 financial debacle.

José López-Portillo y Pacheco (Last presidential address to the Nation, 1982; The president broke into tears after announcing the nationalisation of the banks).  Courtesy of Centro de Estudios Espinosa Yglesias

José López-Portillo y Pacheco (1920-2004) (Last presidential address to the Nation, 1982; The president brakes into tears). Courtesy of Centro de Estudios Espinosa Yglesias

Cárdenas’ analytical framework is based on Stephen Haber’s ideas of co-dependence between political and financial spheres. Cardenas’ evidence-based approach is certainly welcomed. But more so as he tackles head on with the issue of periodicity and method. Specifically whether and how to write accurate and meaningful economic history using of oral sources in the recent past. Revisiting and unpacking method and methodology are topics not far from current debates in business history, as has been portrayed in previous posting in the NEP-HIS blog (click here); the forthcoming panel on oral histories and World War I at theEuropean Association for Banking and Financial History (EABH) meeting in Rüschlikon, Switzerland; recent and forthcoming publications in refereed journal articles by Stephanie Decker and colleagues (see full references below); and JoAnne Yates’s contribution to the edited book by Bucheli and Wadhwani (2014) (as well as their panel on the latter publication during the recent World Business History Conference in Frankfurt). Indeed, one of Cárdenas’ and CEEY trustees’ chief motivations to engage in this research was to listen to what major players had to say while they were still alive.

Cárdenas was not limited to oral sources. He endeavoured to gather surviving but uncatalogued documents as well as the construction and reconstruction of statistical data series to complement historical analysis. Actors were of the highest standing in society including former Presidents, Mexican and foreign Treasury ministers, senior staff at multinational financial bodies, past and present senior bank executives, regulators, economic academic advisors, etc. To deal with historians mistrust of recollection and potential bias, Cárdenas sent in advance a questionnaire split in two sections: one aimed at enabling a 360 degree perspective on key moments; and the second, made out of questions tailored to the participant’s office and status during the event. All participants were informed of who else would take part of the discussions but none were shown others’ responses until all were collected and ready for publication. The risk of being “outed” thus resulted in only a handful of contradictions as participants preferred to declined answering “painful” topics than stretching the “truth”. Meetings were recorded, transcribed, and compared against statistical data. The latter would either strengthen the participant’s argument or was returned to him with further queries. Several iterations resulted in each participant embracing full ownership of individual texts and thus effectively becoming an author of his entry. It’s this process of iterations and guided discussion to which Cárdenas refers to as “testimonials”.


As mentioned, the result of the CEEY’s sponsored research by Cárdenas was two multi book volumes and three documentary videos all of which, as illustrated by the links below to trailers and video documentaries below, have been edited but have no narrators. All views are expressed by the main actors “so that viewers can draw their own conclusions” said Cárdenas during his lecture. By publishing a large number inconclusive outputs based on “testimonials” the CEEY, and Cádernas as his Executive Director, aim to offer a new empirical source for others to include in their own analytical work and come to their own conclusions. Indeed, CEEY’s publications also include a number single author monographs and the commissioning of edited collections by academic authors who have used the testimonials as part of their evidentiary repertoire.

But does Cárdenas have any conclusions of his own? For one, he believes the effort to generate and document events through testimonials and new statistical material results in a much more balanced approach to assess the limited options President López-Portillo had at the end of his term in office. For starters in 1981 he was to nominate on his successor ahead of elections (“el dedazo”). The events that followed were to become the beginning of the end for the one party rule that characterised Mexico during most of the 20th century. At this point in time, Mexico had experienced four record years of strong economic growth. Never seen before and never to be seen since. Its oil production was doubling each year but its international debt was skyrocketing (particularly that of short-term maturity in 1981-2).

But as international oil prices begin to drop, Mexico followed an erratic behaviour (reducing and then raising its oil price) while oil revenues generated 35% of fiscal income and 75% of exports. Moreover, prices for other Mexican exports also fell while a practically fixed-rate parity with the US dollar meant a strongly overvalued peso. A devaluation was followed by a massive increase in salaries. And in the midst of political jockeying and an accelerating worsening of public finance, the President (a lawyer by training) was, according to Cárdenas, to receive conflicting and contradicting information (Cárdenas calls it “deceiving”) on the actual size of the public deficit (which was to double from 7% of GDP in 1981 to 14% of GDP in 1982) as well as the merits of defending the Mexican peso vs US dollar exchange rate (which he publicly claim to “defend like a dog [would defend his master]“.

2014-04-07 13.42.25

This conclusion sheds a significant amount of light on the decisions of late former President López-Portillo. As much as also help to better understand the end of some otherwise promising political careers. The narrative of actors bring fresh light to understand the break up between Mexican political and business elites, which eventually results in the end of the one party rule in the presidential election of 2000. It also helps to explain the break up of the rule of law during the next 15 to 20 years in Mexico as well as the loss of the moral authority of its government.

Cárdenas and CEEY have certainly produced a piece that will resist the test of time. They offer a unique effort in creating contemporary financial history while building from oral sources, privileged access to main actors and in this process, developing an interesting method to deal with concerns around potential bias. Given the passion that the topics of nationalisation and privatisation still generate amongst Mexicans and scholars of modern day Mexico, it is understandable that the analysis has emphasised idiosyncratic elements of these events. But somehow links with wider issues have been lost. For one, nationalisation or sequestration of assets (whether of local or foreign ownership) characterised the “short” 20th century. Nationalisation is one side of the coin. The other is public deficit reduction through the sale of government assets. Indeed, the privatisation of Mexican banks between 1991 and 1992 enabled to finance about half of the reduction of Mexican sovereign debt (though the massive rescue that followed practically annulled that reduction). Mexicans were not inmune to Thatcherism to the same extent that a reduction of the state in economic activity (whether real or not) was and is part and parcel of the “second” globalisation.

In summary and in Enrique Cárdenas own words: “Writing current (economic) history is not only possible, but highly desirable!”. We welcome his contributions to enhance empirical evidence around such important events as well as offering a way to systematically deal with oral sources.


The President’s Decision (1982) – Trailer (with English subtitles)

The President’s Decision (1982) – Full length (in Spanish)

From Nationalisation to Privatisation of Mexican Banks (1982-1991) – Trailer (with English subtitles)

Privatization of Mexican Banks (The President’s Decision Ex Post: Bank Privatization [Tequila effect – 1991-1995] – Trailer (with English subtitles)


Yates, J. (2014) “Understanding Historical Methods in Organizational Studies” in M. Bucheli and R. D. Wadhwani (eds.) Organizations in Time : History, Theory, Methods Oxford: Oxford University Press, pp. 265-283.

Decker, S. (forthcoming) “Solid Intentions: An Archival Ethnography of Corporate Architecture and Organizational Remembering”, Organization.

Decker (2013) “The Silence of the Archives: Postcolonialism and Business History”, Management and Organisational History 8(2): 155-173.

Rowlinson, M. Hassard, J. and Decker, S. (forthcoming) “Research Strategies for Organizational History: A Dialogue between Organization Theory and Historical Theory”, Academy of Management Review.

Note: with special thanks for helpful comments to Sergio Negrete (ITESO) and Gustavo del Angel (CIDE).

Slavery and the Modern World

The transatlantic slave trade and the evolution of political authority in West Africa

by: Warren C. Whatley (


I trace the impact of the trans-Atlantic slave trade on the evolution of political authority in West Africa. I present econometric evidence showing that the trans-Atlantic slave trade increased absolutism in pre-colonial West Africa by approximately 17% to 35%, while reducing democracy and liberalism. I argue that this slavery-induced absolutism also influenced the structure of African political institutions in the colonial era and beyond. I present aggregate evidence showing that British colonies that exported more slaves in the era of the slave trade were ruled more-indirectly by colonial administrations. I argue that indirect colonial rule relied on sub-national absolutisms to control populations and extract surplus, and in the process transformed absolutist political customs into rule of law. The post-colonial federal authority, like the colonial authority before it, lacked the administrative apparatus and political clout to integrate these local authorities, even when they wanted to. From this perspective, state-failure in West Africa may be rooted in a political and economic history that is unique to Africa in many respects, a history that dates at least as far back as the era of the transatlantic slave trade.

URL: EconPapers: Africa

Review by Stephanie Decker

Last Sunday 12 Years a Slave (2013) won best picture at the Oscars ceremony. A timely reminder that slavery remains a subject of contemporary relevance. But researchers have also been concerned with the long-term impact of slavery on the modern world, with some, like Bill Cooke (2003), arguing that ante-bellum plantation slavery was one of the earliest instances of modern management. If you are wondering why people draw this parallel, have a look at this infographic: 

Spot the difference: slave owners and modern managers. Source:

The careful management of slavery and the slave trade meant that slavery produced a large number of records, and in particular, statistically relevant material. But these figures are often sketchy and frequently problematic to assess Africa’s economic development. This remains a problem even for twentieth century quantitative sources as Morten Jerven has shown in his recent book Poor Numbers (2013).

Notwithstanding the inherent difficulties of using statistics for African history, Warren Whatley’s working paper (distributed in a special issue of Nep-His on 2013-11-07) contributes to a growing literature in economic history which seeks to show the effects of an historical event (loosely defined) on the institutional development of a region. The main assumption underlying this research is “path dependence”, and that these “initial conditions” determine subsequent institutional weaknesses which in turn affect economic development. Inspired by the influential work of Acemoglu, Johnson & Robinson (AJR) on the colonial origins of institutions (2001) and the reversal of fortunes (2002), a new line of research was developed by Nathan Nunn (2008, 2009) on the impact of the slave trade on the long-term determinants of economic development. Warren Whatley’s paper takes a slightly different approach to the literature, but this paper develops a similar argument.

Overall, when Africa’s poor long-run economic performance is attributed to its institutional weaknesses, there are, broadly speaking , three major explanations. AJR (2001) famously argued that the imposition of colonialism, which was a form of conquest and thus an illegitimate form of rule, created extractive institutions in non-settler colonies. However, Gareth Austin (2008) has also pointed out that it is not that easy to label all non-settler colony institutional frameworks as purely extractive, e.g. in West African peasant agriculture. An alternative explanation is of course that it was not so much colonial institutions that were extractive, but the trans-Atlantic slave trade. It is hard to argue with the essentially extractive nature of enslavement, but the question is whether it had a long-term effect.

Statistics on African development are often flawed even for twentieth century historical data

The third explanation is labour scarcity (Hopkins, 1973; Austin, 2008), which Whatley seems to find compelling, but links to the slave trade as an economic shock in a way that is hard to follow. Confusingly, he suggests that the slave trade would provide evidence for the labour scarcity hypothesis, but evades the question of whether the slave trade created labour scarcity (which he appears to be saying on p. 4) or whether it exacerbated it to the point of being a major economic shock (more likely in my view). As he also evades the question of why a territory chooses to export a crucial resource that is already scarce, Because if labour was already scarce but was exported nevertheless, one could argue that political institutions were already dysfunctional before the trans-Atlantic slave trade. Not only does the working paper claim to show that slave exports are a better explanation of cross-sectional variation than environmentally induced labour scarcity (p. 4), but that is also shows that the slave trade caused the spread  of absolutism (i.e. authoritarian political systems, p. 6). It is questionable whether cross-sectional data can be used as evidence of a process that took place over a period of time (more than a century, in this case).  This snap-shot of one point in time also does not appear suitable to prove causality, only correlations (p. 12). It is equally plausible that predatory states facilitated the slave trade, an argument that is easily supported by the geographic distribution of specific slave ports.

But causality becomes a really thorny issue with claims such as: “British colonies that exported more slaves were ruled more indirectly by colonial administrations (p. 6).” While in itself a nonsensical statement (slave trade and indirect rule in formal British colonies did not co-exist in time), it is based on the argument that slavery-induced institutions persisted throughout the colonial era and beyond. Nowhere in the paper is this demonstrated convincingly, and the evidence and analysis in figure 2 that supposedly support this claim are deeply anachronistic.

Figure 2 tries to show that the impact of the slave trade continued its influence throughout the colonial period, by linking slave exports to indirect rule (with post-colonial states as the unit of analysis – why not use colonial states?). The slave trade peaked in the eighteenth century, while indirect rule was only developed in the late nineteenth century and continued into the first half of the twentieth century. Post-colonial states (the unit of analysis) were created in the latter part of the twentieth century, and were often criticised for their total lack of connection to pre-colonial polities. These phenomena were not co-existing, and unless one assumes that an institutional framework that had its inception during the slave trade carried through colonialism into independent states, it really makes no sense connecting two sets of data separated by a century via a unit of analysis that did not even exist until much later still.  The argument of the paper is to prove that the slave trade had a long run historical legacy because of institutional inertia and path dependence, but figure 2 does not prove this, and instead just assumes this to be true without considering alternative explanations.

Labour scarcity due to environmental constraints is a far more straightforward explanation, and pretty much spans the entire time period under consideration. It is quite simply the most parsimonious argument, as it does not require any postulated mechanism that carries the institutional shock of the slave trade through colonialism into the post-colonial period. That seems to take the cause-effect relation seriously, whereas this “causal history” simply presents logical tautologies by equating institutions with historical legacies (p. 6), thus making the mechanism (institutions) the same as the effect (long-run historical legacies). And suddenly causation in history seems no longer that complicated.

In summary, I have two major issues with this research: firstly how “causal” history understands institutions (making it both the explanation and what is to be explained), and secondly how the evolution of institutions (diachronic) is supposedly tested by cross-sectional data (synchronic). Causal history in fact dispenses with history and substitutes it with path dependence. But this kind of institutional history has very little to say about why and how institutions change. This is an area in which history could make a real contribution, but not if institutions are reduced to static phenomena. Claims such as that “the political structure of many post-colonial nation-states in Africa is rooted in a political history that […] stretched […] back [to] the era of the transatlantic slave trade” are obviously appealing but remain difficult to prove.


Acemoglu, D., Johnson, S. & Robinson, J.A. (2001). “The Colonial Origins of Comparative Development: An Empirical Investigation.” The American Economic Review 91(5): 1369-1401.

Acemoglu, D., Johnson, S. & Robinson, J.A. (2002). “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution.” The Quarterly Journal of Economics 117(4): 1231-1294.

Austin, G. (2008). “The ‘reversal of fortune’ thesis and the compression of history: Perspectives from African and comparative economic history.” Journal of International Development 20: 996–1027.

Cooke, B. (2003). “The Denial of Slavery in Management Studies.” Journal of Management Studies 40(8): 1895-1918.

Hopkins, A.G. (1973). An Economic History of West Africa, London: Longman.

Jerven, M. (2013). Poor Numbers: How We Are Misled by African Development Statistics and What to Do about It, Cornell Studies in Political Economy, Ithaca, N.Y.: Cornell University Press.

Nunn, N. (2008). “The Long-Term Effects of the African Slave Trades.” The Quarterly Journal of Economics 123(1): 139-176.

Nunn, N., Wantchekon L. (forthcoming). “The Slave Trade and the Origins of Mistrust in Africa.” The American Economic Review.


Brit Steve McQueen becomes first black director to win Best Picture for “12 Years a Slave”. Source: The Independent (2014-3-3