> So, if the paper has so many problems, why did it prove so influential? First, because it utilized cutting-edge techniques at the time (instrumental variables was a new thing back in the 2000s), and because it used novel datasets and clever inference to answer a big-picture question. While “the conditions of colonization determined the institutional quality of colonies” is not a new idea (in fact, Marxist Karl Kautsky came up with a similar idea in 1907), treating it in a formal and empiric manner like this was fairly novel in the 2000s.

So it seems like the answer is not resoundingly clear at all, but the novel methods and analysis was worth the prize, not the perceived veracity of the claims.

Anyways, the topic is about how colonial powers set up institutions in colonized countries, and different types of institutions lead to different types of economic outcomes (inclusive vs extractive). But consider China and India. The former has no colonial institutions, having never been colonized. But both are growing at similar places with similar GDP growth rates (China being slightly ahead). So the idea that only a colonial power could build such institutions, thus all the negatives are outweighed. I don't buy that at this moment. I'm open to learning more though.