Historical Underpinnings of Institutions: Evidence from the Neolithic Revolution

Abstract: This paper provides evidence that a certain prehistorical event, namely the Neolithic Revolution, has profoundly affected modern institutions through its impact on group cultures. Using carbon dates of initial agricultural adoption from various Neolithic archaeological sites, and a panel data of institutional performance measures, the results show a strong inverse relationship between a society's initial agricultural adoption date and its subsequent institutional and economic performance. The paper interprets this as evidence that late adopters of agriculture developed culture conducive for establishing bet- ter institutions, and argues that the introduction of settled agriculture caused a cultural divergence between early adopters and late adopters of agriculture; such divergence has persisted over many generations and led to differences in institutions.