Extractive Institutions and Gains From Trade: Evidence from Colonial Africa

Federico Tadei

No 536, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: A common explanation for African current underdevelopment is the extractive character of institutions established during the colonial period. Yet, since colonial extraction is hard to quantify, its precise mecha- nisms and magnitude are still unclear. In this paper, I tackle these issues by focusing on colonial trade in French Africa. By using new data on export prices, I show that the colonizers used trade monopsonies and coercive labor institutions to reduce prices to African agricultural producers way below world market prices. As a consequence, during the colonial period, extractive institutions cut African gains from trade by at least one-half. JEL Classification: N17; O43 Keywords: Africa, Development, Institutions, Colonization, Trade, Labor Markets

Date: 2014
New Economics Papers: this item is included in nep-afr, nep-agr, nep-his, nep-int and nep-pke
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