| Abstract: |
To explain cross-country income differences, research has recently focused on
the so-called deep determinants of economic development, notably institutions
and geography. This paper sheds a different light on these determinants. We
use spatial econometrics to analyse the importance of the geography of
institutions. We show that it is not only absolute geography, in terms of for
instance climate, but also relative geography, the spatial linkages between
countries, that matters for a country’s gdp per capita. Apart from a country’s
own institutions, institutions in neighboring countries turn out to be
relevant as well. This finding is robust to various alternative specifications. |