Direct versus indirect colonial rule in India: Long term consequences

Direct verses Indirect Colonial Rule in India:

Long-‐Term Consequences By Lakshmi Iyer

Group Charlie: Goh Wei Ming Lee Na Ryung Lee Sze Zhin Nguyen Ai Nhi

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Research QuesBon

• What are the long-‐term outcomes of areas that were under direct BriBsh Colonial rule in India?

• Why did NaBve States provide more public goods than the BriBsh-‐ruled states?

• What are the paKerns observed in the postcolonial period, when BriBsh and NaBve States were subjected to a uniform system of administraBons?

*Na$ve States: Areas of India that were under the administra$on of Indian Kings rather than the Bri$sh rulers

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Research Finding

•  The BriBsh tended to selecBvely annex areas with high agricultural potenBal

•  Directly ruled BriBsh areas have persistently and significantly lower availability of public goods such as schools, health centers and roads in the postcolonial period

•  Gap between direct and indirect ruled areas on human and physical capital is expected to narrow over Bme

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Timeline

*Doctrine of Lapse: Annexed several na$ve states where ruler died without a natural heir.

1757: Beginning of the BriBsh poliBcal control

1947: End of colonial rule

1848-‐1856: Doctrine of Lapse

1857: End of annexaBon

1757-‐1847: AnnexaBon (SelecBve annexaBon)

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Direct vs Indirect Colonial Rule

•  Direct Colonial Rule -‐  Excessive taxaBon to extract the colony’s resources to the benefit of the colonial power

Colonial rulers are not intending to seKle over the long term -‐  Poorly protected property rights -‐  Insufficient focus on Investment

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•  Indirect Colonial Rule (Na<ve States)

Ruling families of the naBve states were acBve in the poliBcs

-‐  PoliBcal pressure to provide public goods

-‐  BeKer incenBves to provide public goods

Rulers were deposed if they governed the state badly

OLS esBmates of the impact of direct colonial rule

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Yi: an outcome variable for district i -‐ agricultural investments and producBvity -‐ public goods levels

Briti: a dummy for whether the district was part of (directly ruled) BriBsh Empire

Xi: other district characterisBcs (mainly geography) i: error term

ɛ

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BriBsh directly ruled areas have more agricultural investments and producBvity. In other words, the impact of BriBsh direct rule on agricultural investment and producBvity is posi<ve and significant.

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Bri<sh Annexed Areas

Selec<ve Annexa<on

Higher Agricultural Investment

•  Endogeneity: -‐BriBsh annex the areas with the greatest agricultural potenBal à OveresBmate -‐BriBsh annex the areas with the least agricultural potenBal à UnderesBmate

β

β

BriBsh annexaBon policy was selecBve and geared toward picking the areas with more potenBal for agriculture.

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•  How to deal with endogeneity? à IV: Exogenous determinant of annexaBon (Doctrine of lapse)

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Bri<sh Annexed Areas

Selec<ve Annexa<on

Higher Agricultural Investment

Areas annexed through either cession, misrule, or conquest had higher agricultural producBvity than areas annexed due

to lapse, or death of a naBve ruler without heir 11

Recall Historical Development

Doctrine of Lapse (IV): •  Areas where ruler died without a natural heir were annexed •  Unexpected event for naBve states •  Valid exogenous determinant of BriBsh annexaBon since it is a maKer of circumstance rather than caused by systemaBc factors that might also affect long term outcomes.

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1757: Beginning of the BriBsh poliBcal control

1947: End of colonial rule


1857: End of annexaBon

1757-‐1847: AnnexaBon (SelecBve annexaBon)

Instrumental Variable

Lapse = 1 if the naBve state was not annexed before 1848 and the ruler died without a natural heir between 1848 and 1856. Lapse = 0 if the naBve state was not annexed before 1848 and such a death did not occur during the period.

Earlier:

Introduced Lapse as IV:

Instrumental Variable

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IV is staBsBcally significant predictor of Brit dummy during the Bme when the doctrine was in force.

Geographical variables do not predict BriBsh AnnexaBon during the period when the doctrine was in force

InteracBon between ruler died without heir and ruler died during the period

IV is relevant: Cov (z, x) = Cov (Lapse, Brit) ≠ 0 14


Comparing Lapse-‐annexed areas with naBve states, IV esBmates shows that Lapse-‐annexed areas have no significant advantages over directly ruled areas

Evidence of Selec<ve Annexa<on: The difference in significance between Full Sample OLS and Post-‐1847 Sample OLS results suggests a high degree of selecBvity in BriBsh annexaBon policy. High quality areas for agriculture output were annexed 15

List of Possible OmiTed Variables and Findings (1)  Was the Doctrine of Lapse tailored toward acquiring naBve states with certain characterisBcs? •  No historical evidence supports that the doctrine was put in place to obtain any specific states (no selec<ve annexa<on)

(2)  Was the death of certain rulers caused deliberately by the BriBsh? •  The death of certain rulers was not caused by the BriBsh and the colonials were not suspicious of the bona fide of natural heirs

(3)  Is it possible that the event of a ruler dying without an heir might reflect some characterisBcs of the areas or of the ruling family, which might arguably affect long term outcome directly? •  Regressions was rerun by the author but results are staBsBcally insignificant

Validity Of IV

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List of Possible OmiTed Variables and Findings

(4) Did ruler death without natural heirs has any long term impact on public goods availability without BriBsh annexaBon? •  The author used a fake instrument and results are staBsBcally insignificant.

(5) Was the territories annexed by lapse were administered differently compared to areas annexed by other means? •  No. The lapsed areas were added to exisBng BriBsh provinces and bought under the prevailing administraBve system in those provinces.

Conclusion: •  Cov (z, u) = Cov (Lapse, u) = 0 (Exogenous) •  Robustness checks support that BriBsh rule had significant negaBve impact on the availability of public goods in the postcolonial period

Validity Of IV

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Results (mean of 1981 and 1991)

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Since end of colonial rule in 1947.. •  Persistent negaBve impact of direct BriBsh rule on availability of overall public goods •  Especially middle school, health centres and roads

yi % of villages having public goods

Briti Post-‐1847

Sample OLS

Briti Post-‐1847

Sample IV

Primary School -‐0.007 -‐0.011

Middle School -‐0.047 -‐0.091**

High School -‐0.061* -‐0.065

Primary Health Centre

-‐0.015* -‐0.031**

Primary Health Subcentre

-‐0.007 -‐0.053**

Canals -‐0.024* -‐0.043

Roads -‐0.010 -‐0.198***

Combined Public Goods

-‐0.026 -‐0.075***

Controlled for geographical factors


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•  Long term impact on development outcomes


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•  Significantly higher infant mortality rates and poverty •  Significantly lower level of consumpBon inequality •  No significant difference in literary rates => difference in primary schools no longer significant

Health and Educa<on Outcomes

Briti Full

Sample OLS

Briti Post-‐1847

Sample IV

Literacy Rate 0.017 0.019

Infant Mortality Rate, 1981

-‐0.481 37.35**

Infant Mortality Rate, 1991

-‐0.772 26.87**

Poverty, 1983 0.093** 0.223**

Poverty, 1987 0.048 0.139**

Poverty, 1993 0.066* 0.123***

Inequality, 1983 -‐0.021* -‐0.064***

Inequality, 1987 -‐0.011 -‐0.045*

Inequality, 1993 0.002 -‐0.079**


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• With the persistent long-‐term impact of colonial rule, the gap between areas with direct and indirect BriBsh rule is expected to conBnue to widen. •  Eventually, as access to public goods is fully equalised, we will expect to see a convergence effect on public goods

Beyond 1991

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n+δ

k

ϒakα-‐1

kbriBsh knaBve

𝑘 briBsh 𝑘 naBve

K*ss

Convergence

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Why did the NaBve States provide more Public Goods?

•  Type of land revenue system -‐ Similar land revenue systems between BriBsh and naBve states à Not a reason -‐ Within BriBsh states, culBvator-‐based land revenue system (more equitable) associated with beKer outcomes, relaBve to landlord-‐based system

•  IncenBves of administrators -‐ Kings have longer tenures -‐ Kings are liable to be deposed for poor governance

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•  Colonialism has a long term economic impact •  In the context of India, it has long term hindering effects

•  Can colonialism bring any posiBve long term economic impact? -‐  Singapore and Hong Kong enjoy a long term posiBve

impact of colonializaBon

•  Why is there a difference? -‐  UlBmate cause: Difference in the objecBves of colonial

insBtuBons

Conclusion

QuesBon

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ColonializaBon

ExploitaBon Colonialism India

SeKler Colonialism Singapore

To exploit natural resources and naBve populaBon

To establish a geographically strategic trading locaBon

Lack of investment in infrastructure and public good

Significant investment in infrastructure and public good

De-‐ColonializaBon

Upon de-‐colonializaBon, the states of the countries are different

Affect the governance and policies of new insBtuBon

Affect the speed of convergence

Direct versus indirect colonial rule in India: Long term consequences

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