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Geography vs. Institutions at the Village Level

  • Michael Grimm
  • Stephan Klasen

There is a well-known debate about the roles of geography versus institutions in explaining the long-term development of countries. These debates have usually been based on cross-country regressions where questions about parameter heterogeneity, unobserved heterogeneity, and endogeneity cannot easily be controlled for. The innovation of Acemoglu, Johnson and Robinson (2001) was to address this last point by using settler mortality as an instrument for geography-induced endogenous institutions and found that this supported their line of reasoning. We believe there is value-added to consider this debate at the micro level within a country as particularly questions of parameter heterogeneity and unobserved heterogeneity are likely to be smaller than between countries. Moreover, at the micro level it is possible to identify more precise transmission mechanisms from geography via institutions to economic development outcomes. In particular, we examine the determinants of economic development across villages on the Indonesian Island of Sulawesi and find that geography-induced endogenous emergence of land rights is the critical institutional link between geographic conditions and technological change. We therefore highlight and empirically validate a new transmission channel from endogenously generated institutions on economic development.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2259.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2259
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  1. Migot-Adholla, Shem, et al, 1991. "Indigenous Land Rights Systems in Sub-Saharan Africa: A Constraint on Productivity?," World Bank Economic Review, World Bank Group, vol. 5(1), pages 155-75, January.
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  3. Mundlack, Yair & Larson, Donald F. & Butzer, Rita, 2002. "Determinants of agricultural growth in Indonesia, the Philippines, and Thailand," Policy Research Working Paper Series 2803, The World Bank.
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  6. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
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  8. Klasen, Stephan, 2007. "Determinants of pro-poor growth:," 2020 vision briefs BB09 Special Edition, International Food Policy Research Institute (IFPRI).
  9. Hanan G. Jacoby & Bart Minten, 2007. "Is Land Titling in Sub-Saharan Africa Cost-Effective? Evidence from Madagascar," World Bank Economic Review, World Bank Group, vol. 21(3), pages 461-485, June.
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  11. North, Douglass C, 1987. "Institutions, Transaction Costs and Economic Growth," Economic Inquiry, Western Economic Association International, vol. 25(3), pages 419-28, July.
  12. Stephan Klasen & Thorsten Nestmann, 2004. "Population, Population Density, and Technological Change," Ibero America Institute for Econ. Research (IAI) Discussion Papers 100, Ibero-America Institute for Economic Research.
  13. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
  14. William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," NBER Working Papers 9106, National Bureau of Economic Research, Inc.
  15. Ravallion, Martin & Datt, Gaurav, 2002. "Why has economic growth been more pro-poor in some states of India than others?," Journal of Development Economics, Elsevier, vol. 68(2), pages 381-400, August.
  16. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," Harvard Institute of Economic Research Working Papers 1856, Harvard - Institute of Economic Research.
  17. Brasselle, Anne-Sophie & Gaspart, Frederic & Platteau, Jean-Philippe, 2002. "Land tenure security and investment incentives: puzzling evidence from Burkina Faso," Journal of Development Economics, Elsevier, vol. 67(2), pages 373-418, April.
  18. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  19. Rozelle, Scott & Li, Guo, 1998. "Village Leaders and Land-Rights Formation in China," American Economic Review, American Economic Association, vol. 88(2), pages 433-38, May.
  20. Miet Maertens & Manfred Zeller & Regina Birner, 2006. "Sustainable agricultural intensification in forest frontier areas," Agricultural Economics, International Association of Agricultural Economists, vol. 34(2), pages 197-206, 03.
  21. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-37, October.
  22. Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
  23. Butzer, Rita & Larson, Donald F. & Mundlak, Yair, 2002. "Determinants Of Agricultural Growth In Thailand, Indonesia And The Philippines," Discussion Papers 14979, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
  24. Klaus Deininger, 2003. "Land Policies for Growth and Poverty Reduction," World Bank Publications, The World Bank, number 15125, December.
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