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Geographic And Institutional Determinants Of Real Income:A Spatio-Temporal Simultaneous Equation Approach

  • Guyslain K. Ngeleza

    ()

  • Raymond J.G.M. Florax

    ()

  • William A. Masters

    ()

    (Department of Agricultural Economics, College of Agriculture, Purdue University)

This paper tests a series of prominent hypotheses regarding the determinants of per-capita income using a novel spatial econometric approach to control for spillovers among neighboring countries and for spatially correlated omitted variables. We use simultaneous equations to identify alternative channels through which country characteristics might affect income, and then test the robustness of those effects. We find support for both “institutionalist” and “geographic” determinants of income. A time-varying index of institutional quality has a strong independent effect on current income, but there is also a persistent effect of geographic factors such as seasonal frost, malaria transmission, and coastal location, which influence income through their links to agricultural output, health, urbanization and trade. The data cover 95 countries across the world from 1960 through 2002, which we use to construct a pooled dataset of nine 5-year averages centered on 1960, 1965, and so on through 2000. We use both limited and full information estimators, partly based on a generalized moments (GM) estimator for spatial autoregressive coefficients, allowing for spatial error correlation, correlation across equations, and the presence of spatially lagged dependent variables

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Paper provided by Purdue University, College of Agriculture, Department of Agricultural Economics in its series Working Papers with number 06-15.

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Length: pages36
Date of creation: 2006
Date of revision:
Handle: RePEc:pae:wpaper:06-15
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Web page: http://www.agecon.purdue.edu/

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  1. ERTUR, Cem & KOCH, Wilfried, 2005. "Growth, Technological Interdependence and Spatial Externalities: Theory and Evidence," LEG - Document de travail - Economie 2005-03, LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne.
  2. Anselin, Luc & Bera, Anil K. & Florax, Raymond & Yoon, Mann J., 1996. "Simple diagnostic tests for spatial dependence," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 77-104, February.
  3. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
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  5. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
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  11. Erich Gundlach, 2004. "The Primacy of Institutions Reconsidered: The Effects of Malaria Prevalence in the Empirics of Development," Kiel Working Papers 1210, Kiel Institute for the World Economy.
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  16. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
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  20. repec:cup:cbooks:9780521424592 is not listed on IDEAS
  21. Bernard Fingleton & Enrique López-Bazo, 2006. "Empirical growth models with spatial effects," Papers in Regional Science, Wiley Blackwell, vol. 85(2), pages 177-198, 06.
  22. Maria Abreu Henri L. F. de Groot & Raymond J. G. M. Florax, 2005. "A Meta-Analysis of β-Convergence: the Legendary 2%," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 389-420, 07.
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