Geography, economic structures and institutions: A synthesis

Abstract

This paper develops a conceptual framework and presents three case studies that show how differences in economic structures are the fundamental cause of differences in economic development. This insight is derived from a synthesis of competing hypotheses. A given economic structure gives rise to a particular distribution of income—an important source of de facto political power. The mechanics of economic change or persistence are in turn determined by the intensity of competition between de facto and de jure political powers and the resolution to this contestation. We use historical evidence to show that geography played a pivotal role in shaping economic structures and demonstrate that geography is still important in explaining the Guyana-Barbados divergence. In the case of Mauritius, it was the good fortune of sugar rents that gave rise to a distributional bargain and institutions of production (industrial policies) that led to the Mauritian miracle.