Does history matter? Colonial education investments in India

Can good policy overcome or alter the effects of history? This question is addressed in this article using unique district-level data for 148 districts of former British India. Controlling for observable differences in geography and income, the ordinary least squares estimates suggest a large and positive effect of colonial expenditures on rural primary education in 1911 on rural literacy up to 1991. However, instrumental variable estimates that control for the endogeneity of colonial investments suggest that the effects of historical spending are significant only up to 1971. Two policy changes can account for these findings: an increase in spending following the 1968 National Education Policy and a greater emphasis on the universal provision of public goods such as schools in the 1970s. Unlike recent studies documenting the persistent effects of historical investments on contemporary outcomes, this study emphasizes how effective policies can overturn the effects of history.