Geography for Growth Patterns

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Submitted By ian1sof
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Don’t blame geography for growth patterns

There is a well-known economic growth debate whether geography affects growth patterns directly or merely through an indirect channel affecting the choice of economic policy and institutions. The view that geography is at the center of the story in shaping the rhythms of economic development dates back to Montesquieu and has been recently revived by Jared Diamond in his book “Guns, germs and steel: The fates of human societies.” This perspective was applied to explain long term patterns of economic growth by Jeffrey Sachs, who argues that growth is related to geographic variables like climate, disease ecology and distance from the coast (Sachs 2003). On the other hand, economists like Acemoglu, Johnson and Robinson, and Engerman and Sokoloff argue against simple geographic hypothesis and illustrate that geography can only affect patterns of growth through the choice of institutions that influence economic performance.
Looking at the current situation, one can observe tremendous differences in living standards between developed and developing countries. There is a variety of explanations why economic performances have diverged so extremely. However, the two main candidates to explain the causes of the big divergence are geography and institutions. The geography hypothesis emphasizes nature forces and geography as the main factors determining economic performance. Acemoglu, Johnson and Robinson (2002), however refute this hypothesis and illustrate that geography can affect economic growth only through an indirect channel, by affecting the choice of institutions. They believe in the correlation between geography and prosperity, but argue that it does not prove causation. In the paper, concerning the reversal of fortunes, the authors demonstrate a negative relationship between countries that were relatively rich in 1500 and…...

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