Economic Growth: the role of geography
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1 ECON 184 Economic Growth: the role of geography ECON 184: Geography and Growth January 26,
2 Contents 1 Geography and growth: initial analysis 3 2 How can geography affect economic growth? Technology Health Regression analysis Methods The sample Results ECON 184: Geography and Growth January 26,
3 1 Geography and growth: initial analysis ECON 184: Geography and Growth January 26,
4 Climate zones Figure 3. Koeppen-Geiger climate zones Tropic of Cancer Tropic of Capricorn Climate zones Tropical-subtropical (Af, Am, Aw and Cw) Desert-steppe (BS and BW) Highland (H) Temperate-snow (Cf, Cs, Df, and DW) Polar (E) ECON 184: Geography and Growth January 26,
5 SSA countries are poor and between the tropics Table 1. Geographical Characteristics of Selected Regions Continent GDP/PC Total Population Total Land Area (million km 2 ) Land in Tropics (%) Population w/100km of Coast (%) Population w/100km of Coast or River (%) Landlocked Population (%) Distance to Core Market (km) Coastal Density (pers/ km 2 ) Interior Density (pers/ km 2 ) Sub-Saharan Africa 1, , Western Europe 19, East Asia 10,655 1, , South Asia 1,471 1, , Transition Economies 3, , Latin America 5, , ECON 184: Geography and Growth January 26,
6 GDP per capita is higher away form the Equator line 2 ECON 184: Geography and Growth January 26,
7 ...same in The Americas ECON 184: Geography and Growth January 26,
8 ...in Africa North South ECON 184: Geography and Growth January 26,
9 and the rest of the world North South ECON 184: Geography and Growth January 26,
10 Tropical problem: malaria Figure 4. Malaria Index 1994 Tropic of Cancer Tropic of Capricorn Malaria Index No Data Gallup et. al. (1999) Geography and Economic Development, CID Harvard, Working Paper. ECON 184: Geography and Growth January 26,
11 Malaria persists between the tropics Figure 5. Malaria risk , 1966, 1994 Tropic of Cancer Tropic of Capricorn High risk of Malaria ECON 184: Geography and Growth January 26,
12 2 How can geography affect economic growth? ECON 184: Geography and Growth January 26,
13 Based on Sachs (2001) and Bloom and Sachs (1998) During and after colonization the poor countries are the same. There is no reversal of fortunes. What remains the same is geography. Examples: Access to river and oceans, distance from the Equator line....but how can geography affect economic growth? ECON 184: Geography and Growth January 26,
14 2.1 Technology Soil formation and erosion: Tropical soils loose nutrients faster. In temperate zone the nutrients are in the soil. In the tropics the nutrients are in the plant. No plant, no nutrients. Tropical soil has higher prevalence of crops pesticides and parasites. Photosynthesis depends (negatively) on plant transpiration and this is higher in the tropics. Water availability: water evaporates faster in the tropics. ECON 184: Geography and Growth January 26,
15 2.2 Health Morbidity and mortality through diseases is more prevalent in the tropics. Malaria requires 18 C for the mosquito to be effective. Bacterial infection is favored by warm and moist environments. However, temperate zones have their own problems (e.g., diphtheria, measels.) Other reasons (Sachs and Gallup, 1999) Coastal regions and trade. Landlock economies. ECON 184: Geography and Growth January 26,
16 3 Regression analysis ECON 184: Geography and Growth January 26,
17 3.1 Methods Question: does geography explain economic growth? We can test this by estimating the following model y i = α + γ geo i + β x i + e i Where y i be the growth rate for country i. geo i set of geography-related variables (e.g. latitude) x i other variables (e.g., education, institutions). γ is the vector of parameters of interest. e i is the error term. We need this to be uncorrelated with the geo i variables. Why? ECON 184: Geography and Growth January 26,
18 3.2 The sample A cross-section sample of countries. The study evaluates not only the effect of geography on growth ( y i ) but also on the (log) levels of income y i. Variable definitions (see handout.) ECON 184: Geography and Growth January 26,
19 3.3 Results Table 2. Level of GDP (1) (2) (3) (4) (5) (6) lgdp50 lgdp90 lgdp95 lgdp95 lgdp95 (non-africa) lgdp95 Tropical Area (%) (4.13) (5.78) (5.10) Pop 100 km (%) (4.02) (5.43) (5.27) (3.63) (4.17) (2.53) LDistance (2.56) (4.39) (3.41) (0.55) Shipping Cost (CIF/FOB) (2.32) (4.66) Malaria index (0-1) (6.60) (2.69) (7.65) Log hydrocarbons per person (1.84) (1.75) (1.85) Socialism (0.31) New State (0-3) (0.98) Trade Openness 0.23 (0-1) (7.38) Public Institutions 0.55 (0-10) (3.17) Constant (13.58) (16.26) (14.10) (9.82) (7.42) (11.06) Observations R Absolute value of t-statistics in parentheses ECON 184: Geography and Growth January 26,
20 Table 3. GDP Growth (1) (2) (3) (4) (5) (6) (7) gr6590 gr6590 gr6590 gr6590 gr6590 gr6590 gr6590 (TSLS) GDP p.c (7.70) (8.02) (8.06) (7.87) (7.60) (7.41) (7.09) Years of secondary schooling (1.75) (1.77) (1.32) (1.34) (1.15) (0.81) (0.89) Log life expectancy (7.23) (6.21) (4.45) (3.60) (1.79) (4.53) (3.89) Trade Openness (0-1) (5.49) (4.79) (4.79) (4.70) (4.39) (4.79) (4.66) Public Institutions (0-10) (3.08) (2.63) (3.32) (3.92) (3.66) (3.20) (3.47) LDistance 0.0 (0.24) Pop100km (%) (3.07) (3.01) (2.64) (1.91) Tropical area (%) (2.28) (1.35) (1.09) (0.82) (1.89) (1.44) Malaria index (2.15) (3.60) (3.87) (1.86) (2.89) dmal (3.93) (2.12) (2.94) Log coastal density (4.91) (4.34) Log inland density (2.26) (1.60) Constant (2.90) (1.17) (0.34) (1.57) (1.76) (0.19) (1.08) Observations R Robust t-statistics in parentheses ECON 184: Geography and Growth January 26,
21 Questions: Can we talk about causal effects? Is geography a fixed factor? What about malaria and south of Europe? What are the policy recommendations you can derive from this approach? ECON 184: Geography and Growth January 26,
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