The Link Between Fundamentals and Proximate Factors in Development
AbstractThe paper introduces a framework for studying the hierarchy of growth factors, from deep to more immediate. The specific setting we examine is 18th and 19th century Germany, when institutional changes introduced by reforms and transportation improvements converged to create city growth. We assess the impact of institutions on growth by allowing two ways for institutions to affect growth. Institutions can directly affect growth, or it can impact on trade, which in turn affects growth. Once we separately quantify the link from institutions to trade, and trade to growth, the independent effect of institutions on growth is small. This suggests that part of what is often understood as trades effect on growth can be attributed to institutional change. It is straightforward to apply this framework to other settings.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18808.
Date of creation: Feb 2013
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Find related papers by JEL classification:
- F1 - International Economics - - Trade
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
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