is that the cross-country variation in institutions induced by these historical circumstances has a large effect on income per worker.

Using a similar methodology, Glaeser et al. (2004) questions Acemoglu et al. (2001)’s view on the importance of institutional quality for economic development, and argues for a central role of human capital (as measured by educational attainment). The starting point is the observation that European settlers did not just bring European institutions with themselves, but also their human capital. Indeed, Glaeser et al. (2004) show that the instrument used by Acemoglu et al. (2001) is positively correlated with current educational attainment, and argues that institutional quality is a product as opposed to a cause of the process of economic development. This view is supported by a regression specification where institutional quality and educational attainment are simultaneously instrumented for, from which it emerges that educational attainment has a stronger explanatory power for economic performance. This conclusion has been in turn questioned by Acemoglu et al. (2014), which argues that the instruments used by Glaeser et al. (2004) are not valid sources of exogenous variation.<sup>3</sup> Recent work has shifted the focus from a national to a subnational setting. Gennaioli et al. (2013) use data at the regional level across 110 countries to examine the relative importance of human capital and other possible determinants of local economic performance. Within-country comparisons allow the authors to control for unobservable factors varying at the country-level, such as national institutions, national culture and national language. In this subnational regression specification, educational attainment emerges as the most important predictor of regional economic performance. Moreover, Gennaioli et al. (2013) use firm-level data to document that entrepreneurs’ and managers’ human capital plays a particularly important role in explaining differences in firms’ productivity. However, Acemoglu et al. (2014) argue that country fixed effects are not sufficient to eliminate omitted variable biases, and that the measure of institutions used by Gennaioli et al. (2013) misses meaningful subnational variation in institutional quality.

Another study exploiting within-country heterogeneity is Ciccone and Papaioannou (2009). The paper adopts a sectoral perspective to test whether human capital favours technology adoption and growth. The authors use data for 37 manufacturing industries across 40 countries, and show that countries with higher levels of education in 1980 saw faster growth in human-capital-intensive industries (relative to other industries) in the following decades, a period characterised by the rapid introduction of skilled labor augmenting technologies. They interpret this result as evidence that high educational attainment was instrumental in

> 3The instruments used by Glaeser et al. (2004) are a dummy for French legal origin and either settler mortality or population density in 1500. As pointed out by Acemoglu et al. (2014), the rationale behind this empirical strategy is not clearly discussed, and it is even unclear whether the two instruments have distinct explanatory power when considered jointly.

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