Corruption, Entrepreneurship, and Social Welfare

TLDR: In this article, a renewed interest among scholars to determine the trend and cause behind unequal distribution of wealth is found in many of the developing countries and remnants of the institutions and legal systems set up by the colonizers remain influential.

Abstract: Income inequality is not a recent phenomenon. However, there is a renewed interest among scholars to determine the trend and cause behind this unequal distribution of wealth. Footprints of colonialism on income inequality are visible in many of the developing countries and remnants of the institutions and legal systems set up by the colonizers remain influential. Yet their impact on the economic activity is still debatable. La Porta et al. (1998, 1999, 2000) in a series of articles argue that countries that were colonized by the British have strong legal system compared to the other countries. Engerman and Sokoloff (2002) suggested that colonizers distributed labors based on the local endowment. For instance, colonizers saw Brazil as a better sugar producer than the United States. Therefore Brazil had a higher share of slave laborer that eventually led to hierarchical society than the United States. Banerjee and Iyer (2005) studies the land ownership structure in India. India was colonized by British over a long period of time. Some of the property rights institutions created by the British colonizers were changed while others remained intact. Areas with higher land ownership rate by the cultivator also had higher investment rate in health and education than areas with land ownership held by the landlords.