Economic growth and economic development 210

Introduction to Modern Economic Growth L o g G D P p e r c a p ita , P P P , in 9 10 AUS NZL USA SGP HKG CAN CHL BHS ARG VEN URY MEX COL CRI BRATTO MYS ZAF TUN ECU PER DZA GTM PRY MAR EGY SLV BOL SUR GUY PAN DOM JAM IDN AGO LKA HND PAK IND SDN BGD GAB NIC SEN VNM HTI KEN CMR COG GIN UGA ZARBFA NER CIV GHA TGO GMB MDG NGA MLI SLE TZA 6 Log Settler Mortality Figure 4.12 The relationship between mortality of potential European settlers and GDP per capita in 1995 relatively poor countries can be explained by differences in their economic institutions (as proxied by security of property rights) Equally important, the evidence indicates that once the effect of institutions is estimated via this methodology, there appears to be no effect of geographical variables; neither latitude, nor whether or not a country is land-locked nor the current disease environment appear to have much effect on current economic outcomes This evidence again suggests that institutional differences across countries are a major determinant of their economic fortunes, while geographic differences are much less important These results also provide an interpretation for why Figure 4.2 showed a significant correlation between latitude and income per-capita This is because of the correlation between latitude and the determinants of European colonization strategies Europeans did not have immunity to tropical diseases during the colonial period and thus settler colonies tended, other things equal, to be created in temperate latitudes Thus the historical creation of economic institutions was correlated with latitude Without considering the role of economic institutions, one would find 196