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Journal of Economic Geography Advance Access originally published online on December 3, 2008
Journal of Economic Geography 2009 9(3):295-328; doi:10.1093/jeg/lbn047
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© The Author (2008). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Economic development and the geography of institutions

Maarten Bosker* and Harry Garretsen*

*Department of International Economics & Business, Faculty of Economics and Business, University of Groningen, The Netherlands.

email <e.m.bosker{at}rug.nl>

JEL classifications: O1, F5, O57

To explain cross-country income differences, research has recently focused on the so-called deep determinants of economic development, notably institutions and geography. This article shows that it is not only absolute geography, in terms of for instance climate or being landlocked, but also relative geography, the spatial linkages between countries, that matters for a country's GDP per capita. More specifically, we analyze the importance of the geography of institutions. We show that apart from its own institutions, the institutional quality in neighboring countries is also important for a country's economic development. This finding is robust to various alternative specifications of relative geography, sample size and the inclusion of additional controls.

Keywords: relative geography, economic development, institutions
Date submitted: 14 December 2006     Date accepted: 16 October 2008


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