While most historians have presented culture, geography and ignorance hypothesis to explain the
inequality among nations, Acemoglu and A.Robinson takes on different views to prove the
earlier hypothesis wrong. Authors argue that despite being closer on border, sharing same
geography, same culture and education, the larger difference of inequalities between Mexico and
United States, North Korea and South Korea are due to institutions they are governed by. These
institutions play a key role in making countries prosper and poor, and this is due to these
institutions the countries have exhibited divergent paths.
Korea, previously a Japanese Colony was divided into North and South Korea on 38th Parallel
after World War II, when Japan finally surrendered. South Korea was administered by United
States and authoritarians of South Korea shaped the economic institutions of the country by
introducing market and free economies, leading country to rapid economic growth. Situation in
North Korea was different as it was governed by Soviet Union which helped Kim II Sung
introducing extractive economic institutions via his communist ideas. The rigid and centrally
planned economic institutions in North Korea gave little incentives to people to own private
property, get education and opt the career of their own choice.
Institutions shape the economies and countries differently, because those who grew up in South
Korea had access to education, incentives to own a private property because of secure property
and their careers were decided by their own will and not by state’s. However, in North side,
people own no private property because sooner or later it would be confiscated by the
government, and the propagandist education they are taught at schools develop no critical
