The Contribution of Economic Geography to GDP Per Capita

56 Pages Posted: 27 Aug 2008

See all articles by Herve Boulhol

Herve Boulhol

Université Paris I Panthéon-Sorbonne - IXIS-CIB

Alain de Serres

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Margit Molnar

Organization for Economic Co-Operation and Development (OECD)

Date Written: April 22, 2008

Abstract

This paper examines how much of the dispersion in economic performance across OECD countries can be accounted for by economic geography factors. More specifically, two aspects of economic geography are examined, namely the proximity to areas of dense economic activity and endowments in natural resources. To do so, various indicators of distance to markets, transportation costs, and dependence on natural resources are added as determinants in an augmented Solow model, which serves as a benchmark. Three measures of distance to markets are found to have a statistically significant effect on GDP per capita: the sum of bilateral distances, market potential and the weighted sum of market access and supplier access. And the estimated economic impact is far from negligible. The reduced access to markets relative to the OECD average could contribute negatively to GDP per capita by as much as 10% in Australia and New Zealand. Conversely, a favourable impact of around 6-7% of GDP is found in the case of two centrally-located countries: Belgium and the Netherlands. Endowments in natural resources are also found to have a significant positive effect on GDP per capita, suggesting that OECD countries have, on average, escaped the natural resource curse or severe forms of the Dutch disease. The paper provides also some tentative evidence that spending on R&D and human capital might have a stronger effect on GDP per capita in countries with a higher degree of urban concentration.

Keywords: GDP-per-capita, economic geography, distance, transport costs, natural resources

JEL Classification: F12, O40, Q30, R11

Suggested Citation

Boulhol, Herve and de Serres, Alain and Molnar, Margit, The Contribution of Economic Geography to GDP Per Capita (April 22, 2008). OECD Working Paper No. 602, Available at SSRN: https://ssrn.com/abstract=1258222 or http://dx.doi.org/10.2139/ssrn.1258222

Herve Boulhol

Université Paris I Panthéon-Sorbonne - IXIS-CIB ( email )

12, place du Panthéon
Paris, IL
France

Alain De Serres (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Margit Molnar

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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