London School of Economics EOPP: Economic Organisation and Public Policy Programme LSE
EOPP: Economic Organisation and Public Policy Programme

Abstract for:

The Reversal of Fortune Thesis Reconsidered

Sanghamitra Bandyopadhyay, Elliott Green, April 2010
Paper No' EOPP 016: | Full paper (pdf)
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Keywords: income distribution; population density, Reversal of Fortune, urbanization.

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This Paper is published under the following series: Economic Organisation and Public Policy Discussion Papers
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Abstract:

Acemoglu, Johnson, & Robinson (2002) have claimed that the world income distribution underwent a 'Reversal of Fortune' from 1500 to the present, whereby formerly rich countries in what is now the developing world became poor while poor ones grew rich. We question their analysis with regard to both of their proxies for pre-modern income, namely urbanization and population density. First, an alternative measure of urbanization with more observations generates a positive (but not significant) correlation between pre-modern and contemporary income. Second, we show that their measure of population density as a proxy is highly flawed inasmuch as it does not properly measure density on arable land, and when corrected with better data the relationship is no longer robust. At best our results demonstrate a Reversal of Fortune only for the four neo-Europes of Australia, Canada, New Zealand and the United States; at worst, we show no Reversal for other former colonies.