WHEN MELISSA DELL was an undergraduate she heard about some economics research that reminded her of a recent trip to Peru. It was no idle daydream. The study, by Daron Acemoglu and Simon Johnson of the Massachusetts Institute of Technology (MIT) and James Robinson of the University of Chicago, argued that colonial institutions could determine economic performance today. Ms Dell wondered whether Peru’s history might explain its extreme poverty. Her answer to the question has helped her win the John Bates Clark Medal, an award given annually by the American Economic Association to an economist under 40.
The colonial institution was the Spanish-imposed “mita” system in Peru and Bolivia, which between 1573 and 1812 forced a seventh of adult men from indigenous communities to work in silver and mercury mines. This was in place in some regions but not others, allowing Ms Dell to measure its effects. Her results supported the findings of Messrs Acemoglu, Johnson and Robinson, that extractive institutions have pernicious and persistent effects. Centuries on, families living just inside mita areas consume 25% less than those just outside them, are less educated and rely more on subsistence farming.
Ms Dell then asked why the mita had such damaging effects. She showed that haciendas, or big agricultural estates, thrived outside mita areas, not inside them. (That, she hypothesised, was because a greedy state did not want competition for scarce mine workers.) Unequal land ownership was thought to have held back Latin American development. But Ms Dell argued that the alternative was worse.
Hacienda owners may not have been benevolent, but they did have the power to lobby for public goods. That meant that places outside mita areas had decent roads. But those inside them did not, and had fewer means and incentives to invest. (Even after the system was phased out, inhabitants had to contend with the confiscation of their land, as well as bandits.)
The research formed Ms Dell’s master’s thesis and was published in a top journal in 2010. Though her broader body of research won her the medal, this paper, gushed the prize-giving committee, “beautifully” illustrates her work, which draws on history, and “very convincingly” pinpoints cause and effect. Now a professor at Harvard University, Ms Dell still explores the role of the state as an engine of development. Together with Benjamin Olken of MIT, for instance, she shows that colonial institutions can have mixed effects: Indonesian villages closer to Dutch sugar factories are today richer than those further away. By combining history and economics, Ms Dell uses the past to shine light on today.■
This article appeared in the Finance and economics section of the print edition under the headline "To good effect"