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Geographic And Institutional Determinants Of Real Income:A Spatio-Temporal Simultaneous Equation Approach

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Author Info
Guyslain K. Ngeleza ()
Raymond J.G.M. Florax ()
William A. Masters () (Department of Agricultural Economics, College of Agriculture, Purdue University)

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Abstract

This paper tests a series of prominent hypotheses regarding the determinants of per-capita income using a novel spatial econometric approach to control for spillovers among neighboring countries and for spatially correlated omitted variables. We use simultaneous equations to identify alternative channels through which country characteristics might affect income, and then test the robustness of those effects. We find support for both “institutionalist” and “geographic” determinants of income. A time-varying index of institutional quality has a strong independent effect on current income, but there is also a persistent effect of geographic factors such as seasonal frost, malaria transmission, and coastal location, which influence income through their links to agricultural output, health, urbanization and trade. The data cover 95 countries across the world from 1960 through 2002, which we use to construct a pooled dataset of nine 5-year averages centered on 1960, 1965, and so on through 2000. We use both limited and full information estimators, partly based on a generalized moments (GM) estimator for spatial autoregressive coefficients, allowing for spatial error correlation, correlation across equations, and the presence of spatially lagged dependent variables

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Publisher Info
Paper provided by Purdue University, College of Agriculture, Department of Agricultural Economics in its series Working Papers with number 06-15.

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Length: pages36
Date of creation: 2006
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Handle: RePEc:pae:wpaper:06-15

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Related research
Keywords: economic growth geography institutions spatial econometrics simultaneous equations

Find related papers by JEL classification:
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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    Other versions:
  14. Cem Ertur & Wilfried Koch, 2005. "Growth, Technological Interdependence and Spatial Externalities - Theory and Evidence," ERSA conference papers ersa05p651, European Regional Science Association. [Downloadable!]
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  15. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
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  16. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May. [Downloadable!] (restricted)
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    Other versions:
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