Returns on investments during the colonial era: the case of the Belgian Congo1

Before the First World War, Belgium participated in a global wave of foreign direct investment. After the war, a shift towards the Belgian colony of the Congo was observed. With regard to these investments, it is commonly argued that higher (expected) profit rates were a strong incentive, although others propose that the colonial powers lost money on their colonial possessions. We measure ex post performance in terms of the time-weighted rate of return by making use of a new database of Congolese stocks and compare the Congolese data with a Belgian sample. Returns on Congolese stocks were much higher, at least until country risk became a reality.