The Link Between Fundamentals and Proximate Factors in Development [report]

Wolfgang Keller, Carol Shiue
2013 unpublished
The paper introduces a framework for studying the hierarchy of growth factors, from deep to more immediate. The speci...c setting we examine is 18th and 19th century Germany, when institutional changes introduced by reforms and transportation improvements converged to create city growth. We assess the impact of institutions on growth by allowing two ways for institutions to a¤ect growth. Institutions can directly a¤ect growth, or it can impact on trade, which in turn a¤ects growth. Once we
more » ... rowth. Once we separately quantify the link from institutions to trade, and trade to growth, the independent e¤ect of institutions on growth is small. This suggests that part of what is often understood as trade's e¤ect on growth can be attributed to institutional change. It is straightforward to apply this framework to other settings. We thank Ran Abramitzky,
doi:10.3386/w18808 fatcat:dmhgwxrdlzbbdfkuixkugij5wa