The long-term impact of colonial rule

This paper compares economic outcomes across areas in India which were under the direct colonial rule of British administrators with areas which were under indirect colonial rule. I take advantage of a specific annexation policy of the British, called the "Doctrine of Lapse", to construct an instrumental variable estimate of the impact of colonial rule. I find evidence that colonial annexation policy was highly selective and concentrated on areas with high agricultural potential; further, areas under direct British rule have significantly lower levels of public goods in the present period. Data from earlier periods indicate that the public goods differences are narrowing over time in the post-Independence period.