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Geography, institutions, and the making of comparative development

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  • Raphael A. Auer

Abstract

While the direct impact of geographic endowments on prosperity is present in all countries, in former colonies, geography has also affected colonization policies and, therefore, institutional outcomes. Using non-colonized countries as a control group, I re-examine the theories put forward by La Porta et al. (J Law Econ Org 15(1):222–279, 1999 and Acemoglu et al. (Am Econ Rev 91(5), 1369–1401, 2001 . I find strong support for both theories, but also evidence that the authors’ estimates of the impact of colonization on institutions and growth are biased, since they confound the effect of the historical determinants of institutions with the direct impact of geographic endowments on development. In a baseline estimation, I find that the approach of Acemoglu et al. ( 2001 ) overestimates the importance of institutions for economic growth by 28 %, as a country’s natural disease environment affected settler mortality during colonization and also has a direct impact on prosperity. The approach of La Porta et al. ( 1999 ) underestimates the importance of colonization-imposed legal origin for institutional development by 63 %, as Britain tended to colonize countries that are remote from Europe and thus suffer from low access to international markets. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Raphael A. Auer, 2013. "Geography, institutions, and the making of comparative development," Journal of Economic Growth, Springer, vol. 18(2), pages 179-215, June.
  • Handle: RePEc:kap:jecgro:v:18:y:2013:i:2:p:179-215
    DOI: 10.1007/s10887-013-9087-z
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    More about this item

    Keywords

    Growth; Institutions; Geography; Comparative development; Colonialism; O11; P16; P51; R11; N50; F54;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • N50 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - General, International, or Comparative
    • F54 - International Economics - - International Relations, National Security, and International Political Economy - - - Colonialism; Imperialism; Postcolonialism

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