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Decolonization: the role of changing world factor endowments

Bonfatti, Roberto (2008) Decolonization: the role of changing world factor endowments. Economic Organisation and Public Policy Discussion Papers (EOPP 001). Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

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Abstract

European colonialism had two key economic aspects: the extraction of colonial wealth by colonizers, and the relevance of trade for colonial economies. I build a simple model of colonialism which puts these two elements at centre stage. By controlling policy in the colony, the colonizer can appropriate part of her wealth; the colony, however, can stage a successful revolution at a stochastic cost. I assume there is some exogenous, non-contractible policy gain from independence, so that the colonizer is forced to concede it when the cost of revolution is low. I incorporate this mechanism in a three-country, Heckscher-Ohlin model where countries (the colonizer, the colony and a third independent country) can decide whether to trade with each other, and the colonizer can threaten to stop trading with the colony if she rebels. Thus, the attractiveness of revolution and the sustainability of colonial power come to depend on the capacity of the colony to access international markets against the will of the colonizer which, in turn, depends on the distribution of world factor endowments. I present historical evidence in support of my theory. My results have important implications for the debate on the economic legacy of colonialism.

Item Type: Monograph (Report)
Official URL: http://sticerd.lse.ac.uk/dps/eopp/eopp01.pdf
Additional Information: © 2008 The Author
Divisions: STICERD
Subjects: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 21 Jul 2014 14:28
Last Modified: 27 May 2020 23:21
Funders: Economic and Social Research Council, Royal Economic Society
URI: http://eprints.lse.ac.uk/id/eprint/58058

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