Abstract
We show that geographical factors influence long-run per capita income directly, as well as indirectly, through the quality of institutions. The direct influence of geography on per capita incomes is robust to the inclusion of a sub-Saharan Africa dummy and other tests. We obtain our results by replacing the usual instrument (settlers’ mortality (SM)) by stronger instruments for institutional quality (latitude, the share of the country in the temperate climatic zone). We also provide evidence that SM suffers from endogeneity with respect to institutional quality for early colonies, because of its dependence on nineteenth-century mortality data.
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