Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development

46 Pages Posted: 7 Nov 2002 Last revised: 16 Dec 2002

See all articles by Dani Rodrik

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Arvind Subramanian

International Monetary Fund (IMF); Center for Global Development

Francesco Trebbi

Vancouver School of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2002

Abstract

We estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instruments for institutions and trade. Our results indicate that the quality of institutions trumps' everything else. Once institutions are controlled for, measures of geography have at best weak direct effects on incomes, although they have a strong indirect effect by influencing the quality of institutions. Similarly, once institutions are controlled for, trade is almost always insignificant, and often enters the income equation with the wrong' (i.e., negative) sign, although trade too has a positive effect on institutional quality. We relate our results to recent literature, and where differences exist, trace their origins to choices on samples, specification, and instrumentation.

Suggested Citation

Rodrik, Dani and Subramanian, Arvind and Trebbi, Francesco, Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development (November 2002). NBER Working Paper No. w9305. Available at SSRN: https://ssrn.com/abstract=347077

Dani Rodrik (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
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HOME PAGE: http://www.ksg.harvard.edu/rodrik/

Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Arvind Subramanian

International Monetary Fund (IMF) ( email )

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Center for Global Development

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Francesco Trebbi

Vancouver School of Economics ( email )

University of British Columbia
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Canada

HOME PAGE: http://faculty.arts.ubc.ca/ftrebbi/

National Bureau of Economic Research (NBER) ( email )

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