Saturday, May 30, 2009

Geography versus rulers

I don't want to get involved with the (more) recent Easterly and Sachs debate, but Easterly has made a bold claim:
The other problem with Sach’s geography story is that it has already been refuted by other economists. The consensus among several academic papers is that destructive governments rather than destructive geography explains the poverty of nations. Acemoglu, Johnson, and Robinson (2006), Easterly and Levine (2003), and Rodrik, Subramanian, and Trebbi (2004) all tested the geography story against the institutions story and came down on the side of institutions.
This is most certainly not the consensus.

First, the Acemoglu, Johnson, and Robinson paper has so many data issues, I would suggest it just stop being referenced in policy debates.

Second, the recent evidence is strongly against institutions and rule of law being more important than geography. Specifically, institutions are not robust to specifications and controls.

While I respect the work of many people on both sides of this issue, this response from Easterly seems similar to, as I have noted previously, the response from the institutions group to the mounting evidence for the geography camp: ignore that there is even a debate.

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