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

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Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development (2004)

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by Dani Rodrik , Arvind Subramanian , Francesco Trebbi

Venue:	FREE UNIVERSITY OF BERLIN
Citations:	816 - 28 self

BibTeX

@ARTICLE{Rodrik04institutionsrule:,
    author = {Dani Rodrik and Arvind Subramanian and Francesco Trebbi},
    title = {Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development},
    journal = {FREE UNIVERSITY OF BERLIN},
    year = {2004},
    pages = {131--165}
}

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Abstract

We estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instrumental variables for institutions and trade. Our results indicate that the quality of institutions “trumps” everything else. Once institutions are controlled for, conventional 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. We relate our results to recent literature, and where differences exist, trace their origins to choices on samples, specification, and instrumentation.

Keyphrases

economic development institution rule james robinson conventional measure recent literature income level adam smith new york income equation harvard econometrics institution trump everything dani rodrik carnegie corporation daron acemoglu helpful conversation instrumental variable regular administration joint imf-world bank seminar certain degree chad jones strong indirect effect simon johnson harvard-mit development seminar weak direct effect respective contribution

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