Selective Inclusion and Colonial Institutions: Rethinking the Settler–Extractive Distinction in Long-Run Development

This paper introduces the concept of Selective Inclusion to re-examine the long-run developmental consequences of colonial institutions in development economics and political economy. Challenging the standard binary distinction between “inclusive” and “extractive” institutions, the paper argues that colonial regimes frequently constructed formally capable institutional structures while selectively restricting access for indigenous and majority populations. This framework resolves the Settler Colony Paradox by showing how countries often treated as institutional benchmarks—particularly in the Americas—could simultaneously exhibit high aggregate income and deep internal exclusion.

The study develops a new historical measure (The Partial Access Index) to operationalize this distinction. The Partial Access Index (PAI) captures institutional access at the time of independence across four domains. These domains are political participation, executive accountability, legal uniformity, and educational access as a gateway to economic and administrative participation.

Using a cross-country sample of 62 former colonies, the analysis identifies a non-linear relationship between institutional access and long-run income inequality. The results indicate that partial institutional inclusion—common in Latin America—is associated with persistently higher inequality than both broad institutional inclusion and the highly exclusionary regimes typical of Sub-Saharan Africa. These findings highlight that who is included matters as much as what institutions exist for understanding persistent inequality in post-colonial development. The analysis is descriptive and does not claim causal identification.

This version is a preprint. The paper is under journal review. Comments and scholarly feedback are welcome