Which comes first: good governance or prosperity? A historical experiment from the South African Republic and the Orange Free State
Stellenbosch Working Paper Series No. WP02/2018Publication date: January 2018
Author(s):
[protected email address] (Department of Economics, Stellenbosch University)
Two neighbouring republics, with a common history and culture, followed very different paths of development in the second half of the nineteenth century. Extraordinary mineral wealth was discovered during this period in the South African Republic (ZAR), the neighbour where political and economic stability was fragile compared with the Republic of the Orange Free State (OFS). We connect these divergent development paths to the literature on the resource curse, especially the recent literature on the conditional resource curse where the quality of the institutional structure plays a crucial role in the outcomes of a large resource discovery. By introducing a new objective measure for the quality of institutions, namely the accuracy of boundaries on maps, we provide evidence of the institutional quality in the ZAR prior to the discovery of gold on the Witwatersrand. The statistical technique that we use, Procrustes analysis, is an innovation in economic analysis. The evidence supports Acemoglu and Robinson's account of the development path in the ZAR, and the later Union of South Africa, as compromised by the conditional resource curse.
JEL Classification:N17, B15, O43
Keywords:Resources curse, Institutional Economics, South Africa
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Upcoming Seminars
Monday 21 July 202512:00-13:00
Izak Odendaal: Old Mutual Wealth Chief Investment Strategist
Topic: "Diverging fiscal policies and what it means for markets"
12:00-13:00
Dr Neil Rankin: Ceo Of Predictive Insights & Stellenbosch University
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Prof Willem Boshoff: Stellenbosch University
Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
BER Weekly
27 Jun 2025 Another setback for the GNU, but oil markets breathe a little easierThis week was marked by heightened tensions both domestically and internationally. At home, friction intensified between the two largest parties in the Government of National Unity (GNU), the ANC and the DA, following the firing of one of the DA's deputy ministers. Internationally, the US conducted airstrikes on three Iranian nuclear facilities using...
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