The dynamics of inequality in a newly settled, pre-industrial society: The case of the Cape Colony

Stellenbosch Working Paper Series No. WP17/2009
 
Publication date: 2009
 
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
[protected email address] (Department of Economics, University of Stellenbosch)
 
Abstract:

One reason for the relatively poor development performance of many countries around the world today may be the high levels of inequality during and after colonisation. Evidence from colonies in the Americas suggests that skewed initial factor endowments could create small elites that owned a disproportionate share of wealth, human capital and political power. The Cape Colony, founded in 1652 at the southern tip of Africa, presents a case where a mercantilist company (the Dutch East India Company) settles the land and establishes a unique set of institutions within which inequality and development evolve. This paper provides a long-run quantitative analysis of trends in asset-based inequality (using Principle Components' Analysis on tax inventories) during the seventeenth and eighteenth century, allowing, for the first time, a dynamic rather than static analysis of inequality trends in a newly settled and pre-industrial society over this period. While theory testing in other societies has been severely limited because of a scarcity of quantitative evidence, this study presents a history with evidence, enabling an evaluation of the Engerman-Sokoloff and other hypotheses.

 
JEL Classification:

N37, D31, D63

Keywords:

South Africa, settler societies, Kuznets, income distribution, asset index, institutions, mercantilism, Dutch East India Company

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13 September 2021
It was a data-heavy week in SA, with the 2021Q2 real GDP data indicating that the economy had better-than-expected recovery momentum in the first half of the year. While growth remained solid in the second quarter, both the survey and actual data released last week revealed the significant impact that the range of shocks at the start of the third quarter...

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