Economic Development and the Geography of Institutions
University of Groningen
University of Utrecht - Utrecht University School of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Radboud University Nijmegen - Department of Economics
Journal of Economic Geography, Vol. 9, No. 3, pp. 295-328, 2009
To explain cross-country income differences, research has recently focused on the so-called deep determinants of economic development, notably institutions and geography. This article shows that it is not only absolute geography, in terms of for instance climate or being landlocked, but also relative geography, the spatial linkages between countries, that matters for a country's GDP per capita. More specifically, we analyze the importance of the geography of institutions. We show that apart from its own institutions, the institutional quality in neighboring countries is also important for a country's economic development. This finding is robust to various alternative specifications of relative geography, sample size and the inclusion of additional controls.
Keywords: relative geography, economic development, institutions
JEL Classification: O1, F5, O57Accepted Paper Series
Date posted: April 28, 2009
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