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The Geopolitical Determinants of Economic Growth, 1960-2024

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  • Tianyu Fan

Abstract

This paper establishes geopolitical relations as a first-order determinant of economic growth. We construct a novel event-based measure of bilateral alignment by employing large language models to compile 373,020 geopolitical events across 193 countries from 1960 to 2024. This comprehensive measure enables us to identify the precise timing and magnitude of geopolitical shifts. Exploiting within-country temporal variation with local projections, we find that a one-standard-deviation improvement in geopolitical relations increases GDP per capita by 10 percent over 20 years. These growth effects operate through multiple reinforcing channels, including domestic stability, investment, trade, and productivity. Over the sample period, geopolitical factors account for GDP variations ranging from -30 to +30 percent across countries.

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  • Tianyu Fan, 2025. "The Geopolitical Determinants of Economic Growth, 1960-2024," Papers 2507.04833, arXiv.org, revised Nov 2025.
    • Handle: RePEc:arx:papers:2507.04833
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    1. Tianyu Fan & Mai Wo & Wei Xiang, 2025. "Geopolitical Barriers to Globalization," Papers 2509.12084, arXiv.org, revised Sep 2025.

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