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The Economic Growth Debate - Geography versus Institutions : Is There Anything Really New?

Ahlfeld, Sebastian ; Hemmer, Hans-Rimbert ; Lorenz, Andreas

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Universität Justus-Liebig-Universität Gießen
Institut: Professur für Volkswirtschaftslehre und Entwicklungsländerforschung
Fachgebiet: Wirtschaftswissenschaften
DDC-Sachgruppe: Wirtschaft (VWL)
Dokumentart: ResearchPaper (Forschungsbericht, Arbeitspapier)
Zeitschrift, Serie: Entwicklungsökonomische Diskussionsbeiträge (Erscheinen eingestellt) ; 34 / 2005
Sprache: Englisch
Erstellungsjahr: 2005
Publikationsdatum: 27.07.2005
Kurzfassung auf Englisch: International analysis of economic growth has confirmed the theoretical assumption that international variations in per capita income can to a large extent be explained by differences
in the accumulation of capital and human capital and by differing rates of technological
progress. However, these results do not provide an answer to the question as to what causes
trans-national variations in accumulation rates and technological progress.

In searching for the ultimate drivers of economic growth, three competing lines of explanation
have emerged:

• The geography-hypothesis which assumes that economic growth is ultimately
determined by geographical characteristics

• The institutions-hypothesis which views the quality of institutions as a fundamental
driver of growth

• The policy-hypothesis which emphasises the importance of economic policy

This paper provides an overview over these three hypotheses and revisits the debate over their
empirical relevance. Comparing the three approaches leads to the conclusion that none of
them is really new and that many of their findings have already been incorporated into the
strategies for international development assistance. Furthermore, the three hypotheses are not
as exclusive as the debate on geography versus institutions would suggest but are indeed
interconnected and complementary.