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Geography, institutions, and the making of comparative development

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  • Raphael A. Auer

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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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    1. repec:eee:wdevel:v:96:y:2017:i:c:p:503-519 is not listed on IDEAS
    2. Demir, Firat, 2016. "Effects of FDI Flows on Institutional Development: Does It Matter Where the Investors are from?," World Development, Elsevier, vol. 78(C), pages 341-359.
    3. Arhan Ertan & Louis Putterman & Martin Fiszbein, 2012. "Determinants and Economic Consequences of Colonization: A Global Analysis," Working Papers 2012-5, Brown University, Department of Economics.
    4. Thomas K.J. McDermott, 2013. "Reconciling conflicting evidence on the origins of comparative development: A finite mixture model approach," GRI Working Papers 130, Grantham Research Institute on Climate Change and the Environment.
    5. repec:eee:deveco:v:128:y:2017:i:c:p:49-64 is not listed on IDEAS
    6. Ertan, Arhan & Fiszbein, Martin & Putterman, Louis, 2016. "Who was colonized and when? A cross-country analysis of determinants," European Economic Review, Elsevier, vol. 83(C), pages 165-184.
    7. Casey, Gregory & Klemp, Marc, 2016. "Instrumental Variables in the Long Run," MPRA Paper 68696, University Library of Munich, Germany.
    8. Daniel L. Bennett & Hugo J. Faria & James D. Gwartney & Daniel R. Morales, 2016. "Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective," Working Papers 2016-07, University of Miami, Department of Economics.
    9. Gani Aldashev & Giorgio Zanarone, 2014. "Endogenous Enforcement Institutions," Working Papers 1403, University of Namur, Department of Economics.
    10. Daniel L. Bennett & Hugo J. Faria & James D. Gwartney & Hugo M. Montesinos-Yufa & Daniel R. Morales & Carlos E. Navarro, 2017. "Evidence on economic versus political institutions as determinants of development," Working Papers 2017-04, University of Miami, Department of Economics.

    More about this item

    Keywords

    Growth; Institutions; Geography; Comparative development; Colonialism; O11; P16; P51; R11; N50; F54;

    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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