What explains political institutions? Evidence from colonial British America

by Elena Nikolova

Vox
August 17, 2012

Why do some states develop as democracies while others remain authoritarian? The question continues to puzzle social scientists. This column presents new data from 13 British American colonies from before the American Revolution. It shows that democratic institutions had a lot to do with the need to attract workers.

Under what circumstances do democratic as opposed to authoritarian institutions emerge? Although a large literature has tackled this question (see Acemoglu et al. 2001, Acemoglu and Robinson 2012, Engerman and Sokoloff 2000), we still have an imperfect knowledge of how representative institutions originate and change. Political institutions are difficult to study not only because they are usually endogenous to other variables, such as inequality, culture, or geography, but also because institutional change is rare or may happen very gradually.

In a recent paper (Nikolova 2012), I argue that institutional change depends on labour market conditions: elites opt for liberal representative institutions when labour is scarce, and vice versa. I use a unique data set covering a period of relatively rapid change in representative institutions in the thirteen British American colonies from their very establishment to the American Revolution. In contrast to theories arguing that inequality is the primary determinant of the quality of political institutions (Boix 2003, Acemoglu and Robinson 2005), I show that liberal representative institutions may arise even in cases of high inequality, as the positive impact of labour scarcity outweighs the usual negative relationship between inequality and democracy. The relative fluidity of political institutions in this setting and time period also questions the validity of arguments linking institutions to historical persistence. In terms of implications for contemporary countries, the theory predicts that as autocratic regimes – such as China – face more binding labour constraints, democracy will be more likely to emerge.

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