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POSC 182 Lecture 7 2010

POSC 182 Lecture 7 2010 - POSC 182 Politics and Economic...

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POSC 182: Politics and Economic Policy Unit 1: Institutions Lecture 7: The Importance of Institutions for Growth January 20, 2010
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What would make the geography hypothesis weaker vis-à-vis other hypotheses? Geography Culture Income / Growth Institutions Trade Weak Strong ? ? Geography ? If geography impacts growth through its effect on the other hypotheses (especially institutions) In other words, the correlation between good geography and high incomes may be due to the presence of better institutions in places where there geography is good.
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Testing the Institutions Hypothesis Property Rights Income ? Let’s take Property Rights as an example of good institutions
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Income and Protection Against Expropriation
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Empirical Problems of Showing that Institutions Cause Income Growth Problems are: Endogeneity (Reverse Causality) – Richer countries can afford to enforce property rights Omitted Variable Bias – It could be something else that we don’t include in the equation—e.g.
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