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Institutions, Geography and Trade: A Panel Data Study

Author

Listed:
  • Jeffry Jacob

    () (Bethel University)

  • Thomas Osang

    () (SMU)

Abstract

A number of recent papers study the impact of institutions, trade and geography known as “deep determinants” of economic development using cross-section data. This paper instead employs a panel data approach to examine the impact of these three determinants on per capita income. Our approach enables us to account for unobserved heterogeneity across countries, an issue that cannot be addressed in a cross-section framework. Moreover, employing the Hausman and Taylor (1981) approach allows us to obtain direct parameter estimates of the time invariant explanatory variables like geography or some institutional measures, making our results comparable to the existing cross-section iterature. Also, by using lagged explanatory variables whenever possible we can account for contemporaneous correlation between these variables and the idiosyncratic error term. We find that the quality of institutions and openness to trade both have positive and statistically significant coefficient estimates throughout most specifications, while geography, captured by malaria ecology measure, has negative estimates that are often, but not always statistically significant. In terms of their economic impact, institutional measures appear to have the strongest impact, followed by openness to trade measures. In comparison, geography measures have rather small elasticity estimates.

Suggested Citation

  • Jeffry Jacob & Thomas Osang, 2007. "Institutions, Geography and Trade: A Panel Data Study," Departmental Working Papers 0706, Southern Methodist University, Department of Economics.
  • Handle: RePEc:smu:ecowpa:706
    as

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    File URL: ftp://ftp1.economics.smu.edu/WorkingPapers/2007/Osang/igt_jacob_osang.pdf
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    References listed on IDEAS

    as
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    2. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," World Bank Economic Review, World Bank Group, vol. 22(2), pages 187-231, June.
    3. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
    4. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, pages 121-144.
    5. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1999. "Geography and Economic Development," International Regional Science Review, , vol. 22(2), pages 179-232, August.
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    Citations

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    Cited by:

    1. Szirmai, Adam & Verspagen, Bart, 2015. "Manufacturing and economic growth in developing countries, 1950–2005," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 46-59.
    2. Guadagno, Francesca, 2016. "The determinanths of industrialisation in developing countries, 1960-2005," MERIT Working Papers 031, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Nathan Perry & Carlos Schönerwald, 2009. "Institutions, Geography, and Terms of Trade in Latin America: A Longitudinal Econometric Analysis," Working Paper Series, Department of Economics, University of Utah 2009_04, University of Utah, Department of Economics.
    4. Foster-McGregor, Neil & Kaba, Ibrahima & Szirmai, Adam, 2015. "Structural change and the ability to sustain growth," MERIT Working Papers 048, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Efendic, Adnan & Pugh, Geoff & Adnett, Nick, 2011. "Institutions and economic performance: A meta-regression analysis," European Journal of Political Economy, Elsevier, vol. 27(3), pages 586-599, September.

    More about this item

    Keywords

    Development; Institutions; Openness; Geography; panel data;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • H1 - Public Economics - - Structure and Scope of Government
    • F1 - International Economics - - Trade

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