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What rules in the 'deep' determinants of comparative development?

  • Alvar Kangur

During the past decade or so empirical literature on comparative development of nations has turned to investigation of "deep" or determinants of productivity and capital intensity, such as institutions, trade, geography and human capital. In this paper I revisit this debate and make three contributions. First, I review critically the main findings in the literature using all potentially endogenous determinants of comparative development. The findings suggest that in general the results are not robust to the use of measures of institutional quality and/or respective instruments, and might be misspecified. Second, I make a careful selection across all the instruments for all the deep determinants and argue that settler mortality proposed by Acemoglu et al. (2001) is not a dominant instrument for institutional quality and its potentially the most prone to fail to satisfy the exclusion restriction. Consequently I provide evidence that the theory of colonial origins is not institutional in its nature and rather supports human capital prevalence hypothesis. Third, I show that earlier studies have failed to account for substitutable roles between institutions and openness. In the final race, however, human capital and geography come out as winners with openness having at best indirect complementary effects.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 386.

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Date of creation: 01 Feb 2008
Handle: RePEc:oxf:wpaper:386
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