Discussion paper
DP6811 Black Man?s Burden: Measured Philanthropy in the British Empire, 1880-1913
Ferguson and Schularick (2006) recently provided a measure of the effect of Empire subjection on borrowing countries? interest rates. They find this effect to be large and significant, ranging between 80 to 180 basis points. We argue that their methodology is inadequate and that their estimates are biased. The reason is that Empire subjection did not affect borrowing conditions at the margin, as they assume, but structurally. We also develop a new approach of the incidence of colonial rule on market access. It suggests that the benefits of Empire were unevenly distributed. It shows that the main incidence of colonial rule was to create financial incentives to adopt development policies that encouraged government spending.
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