Geography and Economic Growth

This paper addresses the complex relationship between geography and macroeconomic growth. It investigates the ways in which geography may matter directly for growth, controlling for economic policies and institutions, as well as the effects of geography on policy choices and institutions. It finds that location and climate have large effects on income levels and income growth through their effects on transport costs, disease burdens, and agricultural productivity, among other channels. Furthermore, geography seems to be a factor in the choice of economic policy itself. When geographical regions that are conducive to modern economic growth are identified, it is found that there is a disjunction between such regions and many areas of the world of high population density and rapid population increase. This is especially true of populations that are located far from coasts and navigable rivers and that thus face large transport costs for international trade, as well as of populations in tropical regions of high disease burden. Much of the population increase in the next 30 years is likely to take place in these geographically disadvantaged regions. Geography and Economic Growth John Luke Gallup and Jeffrey Sachs with Andrew D. Mellinger Two centuries after the start of modern economic growth, a large portion of the world remains mired in poverty. Some benefits of modern development, especially increased life expectancy and reduced infant mortality, have spread to nearly all parts of the world, though huge and tragic discrepancies remain in some regions. In terms of material well-being, however, as measured by gross domestic product (GDP) per capita adjusted for purchasing power parity (PPP), the yawning gaps are stunning and show few signs of amelioration. According to the valuable data assembled by Angus Maddison for the Organization of Economic Cooperation and Development (1996), Western Europe outpaced Africa in average per capita GDP by a factor of around 2.9 in 1820 and a factor of 13.5 by 1992. More stunningly, Maddison puts the African per capita income in 1992 at $1,284 (measured in 1990 PPP adjusted dollars), which is essentially identical to his estimate of the average GDP per capita in Western Europe in 1820 at $1,292. One area of the developing world, Asia, showed significant progress during the past 30 years, with average incomes rising from around $1,275 in 1965 to $3,252 in 1992 on the Maddison data. In Africa, however, the levels of income in the 1990s were about the same as in 1970. (Maddison puts Africa’s average income at $1,289 in 1971 and $1,292 in 1992.) In Latin America and the Caribbean, average income levels in 1992 ($4,820) were only 6.6 percent higher than in 1974 ($4,521).