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Geography Rules Too! Economic Development and the Geography of Institutions

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  • Maarten Bosker
  • Harry Garretsen

Abstract

To explain cross-country income differences, research has recently focused on the so-called deep determinants of economic development, notably institutions and geography. This paper sheds a different light on these determinants. We use spatial econometrics to analyse the importance of the geography of institutions. We show that it is not only absolute geography, in terms of for instance climate, but also relative geography, the spatial linkages between countries, that matters for a country’s gdp per capita. Apart from a country’s own institutions, institutions in neighboring countries turn out to be relevant as well. This finding is robust to various alternative specifications.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1769.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1769

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  1. Francisco Alcalá & Antonio Ciccone, 2001. "Trade and productivity," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 580, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2002.
  2. Crafts, Nicholas & Venables, Anthony J., 2001. "Globalization in History: A Geographical Perspective," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3079, C.E.P.R. Discussion Papers.
  3. Redding, Stephen J & Venables, Anthony J., 2000. "Economic Geography and International Inequality," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2568, C.E.P.R. Discussion Papers.
  4. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3643, C.E.P.R. Discussion Papers.
  5. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 83-116, February.
  6. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, Springer, vol. 9(3), pages 271-303, 09.
  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  8. Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
  9. Ades, Alberto & Chua, Hak B, 1997. " Thy Neighbor's Curse: Regional Instability and Economic Growth," Journal of Economic Growth, Springer, Springer, vol. 2(3), pages 279-304, September.
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Cited by:
  1. Heijdra, B.J. & Ligthart, J.E., 2005. "Fiscal Policy, Monopolistic Competition and Finite Lives," Discussion Paper, Tilburg University, Center for Economic Research 2005-126, Tilburg University, Center for Economic Research.

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