Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development
November 1, 2002
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Summary
We estimate the respective contributions of institutions, geography, and trade in determining cross-country income levels using recently developed instruments for institutions and trade. Our results indicate that the quality of institutions "trumps" everything else. Controlling for institutions, geography have at best weak direct effects on incomes, although it has a strong indirect effect through institutions. Similarly, controlling for institutions, trade has a negative, albeit, insignificant direct effect on income, 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.
Subject: Foreign exchange, Health, Human capital, Labor, National accounts, Personal income, Population and demographics, Production, Productivity, Purchasing power parity
Keywords: Africa, AJR sample, Asia and Pacific, coefficient estimate, country's price level, dependent variable, development, East Asia, GDP share, geography, income level, Institutions, integration, least squares, Personal income, Productivity, Purchasing power parity, standard deviation, Sub-Saharan Africa, Western Europe, WP
Pages:
46
Volume:
2002
DOI:
Issue:
189
Series:
Working Paper No. 2002/189
Stock No:
WPIEA1892002
ISBN:
9781451859621
ISSN:
1018-5941
