Current Affairs / Nobel Prize 2025 — UPSC Mains Model Answer

Acemoglu, Johnson, and Robinson argued that where settler mortality was high — due to disease environments — European colonisers established extractive institutions designed to drain resources rather than settle. Where mortality was low, they replicated inclusive institutions from their home countries. This divergence in institutional design persists centuries later as measurable differences in per-capita income.

The framework distinguishes between extractive institutions, which concentrate power and undermine property rights, and inclusive institutions, which enforce contracts, protect property, and enable broad participation in economic activity. The Nobel laureates demonstrated that this institutional quality — not factor endowments — is the primary determinant of why some nations remain poor.

For developing economies, the hypothesis shifts the reform agenda toward strengthening rule of law, judicial independence, and anti-corruption mechanisms rather than merely increasing capital flows or aid. Institutional reform is slow, politically contested, and path-dependent, making it structurally harder to address than macroeconomic imbalances.

Critics note that the settler-mortality instrument may not fully account for pre-colonial institutional variation or the role of culture and social capital. Some post-colonial states with weak inherited institutions have nonetheless achieved rapid growth, suggesting that agency, leadership quality, and policy choices can partially override historical legacies.