Externally-Imposed Institutions and Regional Growth Differences: Evidence from France and Germany

This paper provides a critical examination about the effect of externally-imposed French Revolution institutions on regional economic development variations in the 19th century by focusing on the experience of France where the Revolution originated. Acemoglu et al. (2011) take advantage of the “natural experiment” provided by the imposition of French institutions on a number of German states by the invading Napoleonic armies. The argument that the differences in the long-run economic performance of German states stem from the differences in externally-imposed French and domestic German institutions needs to be investigated further. In order to achieve this purpose, first the variation in historical urbanization rates across the French departments is examined statistically. Then a difference-in-difference estimation is used to identify a treatment effect causing growth differences between border and interior departments. The proposed treatment effect is the faster industrialization due to intensified minerals mining and railway construction in north and northeast France after 1850. It is shown that the border departments experienced higher economic growth primarily after 1850 even though the Revolution institutions and reforms were imposed uniformly across the French departments. Therefore, all the variation in economic development across German polities cannot be attributed to the externally-imposed French institutions and reforms.