4/26/2019 A Brief Report on

History and
institutions
Sakshi Agarwal, Nabaneeta Saha,
Happy Kumar
The two papers presented here describe how historical experiences determine past institutions

and consequently current institutions and therefore long term economic performance. This is in

continuation with the AJR hypothesis of how colonial experience determined the different

institutions and different impacts on the economic performance.

Direct versus Indirect colonial Rule in India: Long term consequences by

Lakshmi Iyer

This paper examines how the formation of two different kinds of rule in India, i.e. Direct and

Indirect rule lead to the formation of different institutions.

It has been found that in these types of analyses, it is difficult to isolate the effect of exogenous

variation in institutions. Hence, this paper uses the data from colonial rule in India which helps

it to establish an exogenous source of variation, given by the variable Lapse. This variable serves

as a very good source of exogenous variation and there are several robustness checks done in

the paper for the same. This instrumental variable estimates indicates that directly ruled areas

lag behind in availability of public goods and agricultural outcomes in the post- colonial period

with adverse consequences on development indicators. This result emerges as better

institutions were formed in the indirectly ruled areas due to various incentives faced by native

rulers. The other key finding that the paper has done is that the impacts of historical

circumstances can be undone though it might take several decades for that.

This is one of the few papers that analyses the relative effect of direct and indirect colonial rule,

whereas a lot of earlier research focusses on overall impacts of British Empire in India or
impacts of different types of land revenue systems on institutions. Also, the author here is very

clear that she does not wish to analyze the overall impact of British Empire, but the relative

effect.

Though there are some loopholes that the paper has suffered. That is, due to short period of

analysis, many states were left out of sample which could have created the small sample bias.

Also, the control variables were quite less such as the impact of State Capacity( Alexander Lee,

2017) was not analysed.

Priyanka Pandey:“Service Delivery and Corruption is Public Services: How does

History Matter?”

The paper provides micro-level evidence on persistence of colonial land tenure system on

current institutions through empowerment of elites which in turn affects the quality of public

services available in elite ruled areas. Only the state Uttar Pradesh is considered for the model

and 26 districts and 130 Gram Panchayats (GP) belonging to those districts are taken in the

sample.It is to be noted that UP comes under ‘Directly ruled’ state by the British during colonial

regime.

Observations-

 The paper provides evidence on the negative impact of landlord based land tenure

systems (elite-ruled areas) on quality of public goods. As a proxy for public good,

primary education in public schools is considered. School performance and village

governance are observed to be significantly worse in landlord based areas

  Results support the hypothesis of a mutually reinforcing relationship between class

and caste inequalities in UP.

 Results also indicate, in elite ruled areas a relatively higher proportion of Schedule

Caste (SC) population access primary education.

Critical comments-

The following are our learning from the paper-

 Proxy to public services- To have a broader view of quality of public services, other

public services available such as- healthcare, employment schemes, vaccination

camps etc are also considered under the study. It should be mentioned the study

does consider ‘whether the GP council’s health committee meet” under

characteristics of GP and has found they meet less often under landlord areas.

 Applicability- Being a micro level study, features of the sample districts, especially

their geographical location and the history of land tenure system in UP makes the

possible empirical challenges (such as endogeneity) relatively easy to tackle. To

replicate the exact model on states (esp. under indirect British Rule), researcher must

keep in mind the unobservable factors that may exist in the say state and not in UP

and can affect the reliability of estimates. But the astounding simplicity of the model

make it relatively easy to replicate and modify it suitably for the subject.

 Quality of public services- Under one state and common state law, it is unlikely to

find large significant differences in number of primary education public schools. Thus,
 use of ‘quality’ of education to understand impact of local governance on public

services is justified. This approach gives a deeper understanding of the impact of

historical institutions on current economic outcomes.

The two papers are similar in many ways. Both the papers have similar hypothesis. Both the

papers have found that the landlord based systems had significant negative impact on the

economic performance. In fact, a possible reason for non-analysis of indirectly ruled areas in

Priyanka Pandey’s paper can be inferred from Lakshmi Iyer’s paper that in indirectly ruled

areas, difference between landlord based and the non-landlord based was insignificant. Both

the papers are complimentary to each other and it seems that Priyanka Pandey’s paper is a

micro subset of Lakshmi Iyer’s paper.

The results of the two paper are significant for policy analysis and future research. However,

the applicability of these should be done keeping in mind all the assumptions.