Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies

Many scholars are concerned with why the U.S. and Canada have been so much more successful over time than other New World economies. Since all New World societies enjoyed high levels of product per capita early in their histories, the divergence in paths can be traced back to the achievement of sustained economic growth by the U.S. and Canada during the 18th to early 19th centuries. This paper highlights the relevance of differences in the degree of inequality in wealth, human capital, and political power in accounting for the variation in the records of growth, and suggest that the roots of inequality lay in differences in the initial factor endowments of the respective colonies The large concentration of Native Americans, and the suitability of cultiva- ting sugar and other crops were key in generating extreme inequality. This encouraged the evolution of societies where small elites of European descent held highly disproportionate shares of the wealth, human capital and political power, and dominated the population economically and politically. Absent from the nearly all-inclusive list of New World colonies with these conditions were the British settlements in the northern part o