Copenhagen, Oct 14 (EFE).- Three US-based economists were awarded the Nobel Prize in Economics for their pioneering research showing how social institutions shape a nation’s economic success and long-term prosperity.
“Daron Acemoglu, Simon Johnson, and James Robinson have demonstrated the importance of societal institutions for a country’s prosperity,” the Royal Swedish Academy of Sciences said in a statement.
One of their key findings was that regions wealthy during colonization are now among the poorest, with high settler mortality rates linked to lower GDP per capita today.
A Tale of Two Nogales
The laureates used Nogales, a border city divided between the US and Mexico, to illustrate their findings.
Nogales, Arizona, on the northern side, is relatively prosperous with secure property rights, higher education levels, and stable political systems. On the southern side in Sonora, Mexico, residents are considerably poorer, face more organized crime, and have fewer political rights.
Geographically, both sides share the same climate and cultural roots, but the institutions governing them differ drastically.
“The people who live north of the fence live in the USA’s economic system, which gives them greater opportunities to choose their education and profession.”
In contrast, those south of the fence live under conditions that limit their ability to influence legislation,” the academy noted.
This example, the academy noted, is part of a broader historical pattern linked to colonization.
Colonial Legacy and Institutional Differences
The researchers found that population density played a major role in the type of institutions developed in colonized areas.
Densely populated regions offered greater resistance but also provided cheap labor once subdued, leading to the establishment of extractive institutions benefiting local elites.
In sparsely populated areas, European settlers moved in larger numbers, leading to the creation of more inclusive institutions that encouraged investment and hard work.
Another factor was the prevalence of diseases in settler communities. In areas where diseases were most dangerous to European settlers, dysfunctional systems, poverty, and weak rule of law prevail today.
“The incidence of disease, which can be seen in historical statistics of mortality during colonial times, is strongly associated with current economic prosperity,” the researchers noted.
They argued that extractive institutions established by European colonizers in these regions have persisted, hindering development.
Model of Institutional Change
The laureates developed a model to explain how political institutions form and change, focusing on three components: conflict over resource allocation, the power of the masses to mobilize against elites, and the “commitment problem,” where elites must transfer decision-making power to maintain stability.
Prize and Ceremony
Acemoglu, Johnson, and Robinson will share the $1.1 million awarded to Nobel laureates this year. The awards ceremony will take place on December 10, with the Peace Prize in Oslo and the rest in Stockholm.
The Nobel Memorial Prize in Economic Sciences, established in 1968 through a donation from the National Bank of Sweden, is the only Nobel Prize not created by Alfred Nobel. EFE
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