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

By Arvind Subramanian, Francesco Trebbi, Dani Rodrik

November 1, 2002

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Arvind Subramanian, Francesco Trebbi, and Dani Rodrik. Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development, (USA: International Monetary Fund, 2002) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/189
Stock No:

WPIEA1892002
ISBN:

9781451859621
ISSN:

1018-5941

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