hero working papers

Extractive Institutions and Gains From Trade: Evidence from Colonial Africa

Number: 536
Year: 2014
Author(s): Federico Tadei
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.

Keywords: Africa, Development, Institutions, Colonization, Trade, Labor Markets
JEL codes: N17; O43