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Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development

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  • Dani Rodrik
  • Arvind Subramanian
  • Francesco Trebbi

Abstract

We estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instrumental variables for institutions and trade. Our results indicate that the quality of institutions "trumps" everything else. Once institutions are controlled for, conventional measures of geography have at best weak direct effects on incomes, although they have a strong indirect effect by influencing the quality of institutions. Similarly, once institutions are controlled for, trade is almost always insignificant, and often enters the income equation with the "wrong" (i.e., negative) sign. We relate our results to recent literature, and where differences exist, trace their origins to choices on samples, specification, and instrumentation.

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 9 (2004)
Issue (Month): 2 (06)
Pages: 131-165

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Handle: RePEc:kap:jecgro:v:9:y:2004:i:2:p:131-165

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Web page: http://www.springerlink.com/link.asp?id=102931

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  2. North, Douglass C., 1993. "Economic Performance through Time," Nobel Prize in Economics documents 1993-2, Nobel Prize Committee.
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  11. Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 133-162, January.
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  13. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," Harvard Institute of Economic Research Working Papers 1856, Harvard - Institute of Economic Research.
  14. Sharun Mukand & Dani Rodrik, 2002. "In Search of the Holy Grail: Policy Convergence, Experimentation, and Economic Performance," NBER Working Papers 9134, National Bureau of Economic Research, Inc.
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  18. Jeffrey D. Sachs, 2001. "Tropical Underdevelopment," NBER Working Papers 8119, National Bureau of Economic Research, Inc.
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  1. Did AGOA work? Identification and export incentives
    by jdingel in Trade diversion on 2010-08-15 14:55:38

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  1. > Schools of Economic Thought, Epistemology of Economics > Heterodox Approaches > Institutional Economics
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