Historical legacies: A model linking Africa's past to its current underdevelopment

Abstract

Recent studies have found evidence linking Africa’s current under-development to colonial rule and the slave trade. Given that these events ended long ago, why do they continue to matter today? I develop a model, exhibiting path dependence, which provides one explanation for why these past events may have lasting impacts. The model has multiple equilibria: one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production. I show that external extraction, when severe enough, causes a society initially in the high production equilibrium to move to a low production equilibrium. Because of the stability of low production equilibria, the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends. The model provides one explanation why Africa’s past events continue to matter today.