Journal of Economic Growth

, Volume 9, Issue 2, pp 131–165 | Cite as

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

  • Dani Rodrik
  • Arvind Subramanian
  • Francesco Trebbi
Article

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.

growth institutions openness geography 

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Copyright information

© Kluwer Academic Publishers 2004

Authors and Affiliations

  • Dani Rodrik
    • 1
  • Arvind Subramanian
    • 2
  • Francesco Trebbi
    • 3
  1. 1.Kennedy School of GovernmentHarvard UniversityCambridgeUSA
  2. 2.International Monetary Fund (IMF)USA
  3. 3.Department of EconomicsHarvard University, Littauer centerCambridgeUSA

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