Geography and Institutions: A Review of Plausible and Implausible Linkages

In recent years, empirical investigations have shown that various aspects of physical geography are closely related to the quality of a country’s economic institutions. For instance, distance from the equator in latitude degrees is positively correlated to both institutional quality and to levels of economic development. In order to reach a better understanding for this type of regularities, this article reviews the growing empirical literature on geography and institutions, as well as a large body of older and newer theoretical works on the social impacts of geography. It is argued that the most plausible candidates for explaining the broadest cross-continental variance in institutional quality are those focusing on historical differences in biogeographical potential for early agriculture and on the importance of disease geography for European colonization strategy.

Introduction: Recent research on long-run economic development has shown that geogra-phy is a central factor for understanding the current distribution of prosper-ity across the world. However, for many decades, economists used to start their analysis by just taking as given certain patterns of trade, comparative advantage, and institutions like private property rights and a benevolent ex-ecutive. Because of this neglect of both geographical factors and institutions,economic theory largely failed to account for the enormous international differences in income.

Author: Ola Olsson

Source: Göteborg University

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