whether the institutions that were adopted would favour the exploitation or the accumulation of existing resources. They also show that institutions appear to be fairly persistent over time, which implies that settler mortality can be considered as a valid instrument variable for present institutions. My empirical result, which is based on the MRW data on output per working-age person in 1985 as the dependent variable, points to a large positive effect of a variation in institutional quality on the level of development, as in the study by Acemoglu et al. (2001).8 My point estimate of 0.71 implies that a one unit increase in the measure of institutional quality is associated with a 0.71 per cent difference in output per worker. What this means in quantitative terms can be seen by comparing two countries, say Chile and Nigeria, where the difference in the measure of institutional quality is 2.3. So my point estimate predicts a 1.6 log-difference between the log GDPs (per working-age person) of the two countries, or approximately a 4-fold difference (e1.6 − 1) in output per working-age person. In the data used, output per working-age person actually differs by a factor of 4.7 between Chile and Nigeria. This result suggests that the international variation in output per worker can be explained by international differences in a broad concept of technology conditional on a constant capital–output ratio.