B.J.Pol.S. 40, 487–508 Copyright r Cambridge University Press, 2010 doi:10.1017/S0007123410000141 Colonialism, Property Rights and the Modern World Income Distribution MATTHEW D. FAILS AND JONATHAN KRIECKHAUS* Influential studies by Acemoglu, Johnson and Robinson claim that colonial legacies explain the origins of development-promoting property rights and thus account for the modern world income distribution. Specifically, they argue that European colonial powers engineered a global ‘reversal of fortune’, bringing property rights and prosperity to relatively uninhabited colonies while imposing inefficient institutions on locales with less potential for settlement. We re-evaluate their theoretical arguments and empirical findings and come to a different conclusion. We concur that British colonialism dramatically restructured four colonies, resulting in phenomenal economic success. For the majority of the world, however, colonialism had no discernible effect on property rights. We conclude that contemporary development studies must find another explanation for the modern world income distribution. Contemporary development studies highlight the quality of economic institutions as the root of modern prosperity. 1 This argument has captivated the economics profession, partly because empirical studies yield a strong correlation between property rights institutions and economic growth. 2 The main objection to this new conventional wisdom is that institutional quality may be endogenous to the development process; richer countries are presumably better able to afford stronger property rights, and these property rights may, therefore, have no independent effect on growth. 3 Two studies by Acemoglu, Johnson and Robinson (AJR hereafter) have become hugely influential, largely because they directly confront this endogeneity issue. 4 AJR argue that * Department of Political Science, Oakland University; Department of Political Science, University of Missouri (fails@oakland.edu; Krieckhausj@missouri.edu). A previous version of this article was presented at the Annual Meeting of the Midwest Political Science Association, 2008. The authors thank James Mahoney, David Albouy, the Editor Hugh Ward, and the Journal’s anonymous reviewers for helpful suggestions. They also thank the participants in an informal discussion on colonialism organized by John Gerring and James Mahoney in 2007. Appendix A and Appendix B are available with the Journal’s website version of this article, published by Cambridge University Press, 2010, doi:10.1017/ S0007123410000141, as well as on the authors’ personal websites. 1 Douglass C. North, Structure and Change in Economic History (New York: W. W. Norton, 1981); Douglass C. North, Institutions, Institutional Change, and Economic Performance (Cambridge: Cambridge University Press, 1990). 2 Prominent examples include Stephen Knack and Philip Keefer, ‘Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures’, Economics and Politics, 7 (1995), 207–27; Jeffrey D. Sachs and Andrew M. Warner, ‘Fundamental Sources of Long-Run Growth’, American Economic Review, 87 (1997), 184–8; and William Easterly and Ross Levine, ‘Tropics, Germs, and Crops: How Endowments Influence Economic Development’, Journal of Monetary Economics, 50 (2003), 3–39. 3 See, for instance, Alberto Chong and Ce´ sar Caldero´ n, ‘Causality and Feedback between Institutional Measures and Economic Growth’, Economics and Politics, 12 (2000), 69–81. 4 Daron Acemoglu, Simon Johnson and James A. Robinson, ‘The Colonial Origins of Comparative Development: An Empirical Investigation’, American Economic Review, 91 (2001), 1369–401; Daron Acemoglu, Simon Johnson and James A. Robinson, ‘Reversal of Fortune: Geography and Institutions in