OECD Economics Department Working Papers

ISSN: 
1815-1973 (online)
http://dx.doi.org/10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

The Contribution of Economic Geography to GDP Per Capita You or your institution have access to this content

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Author(s):
Hervé Boulhol1, Alain de Serres, Margit Molnar1
Author Affiliations
  • 1: OECD, France

14 Apr 2008
Bibliographic information
No.:
602
Pages:
55
http://dx.doi.org/10.1787/242216186836

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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, natural resources, economic geography, distance, transport costs
JEL Classification:
  • F12: International Economics / Trade / Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation
  • O40: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / General
  • Q30: Agricultural and Natural Resource Economics ; Environmental and Ecological Economics / Nonrenewable Resources and Conservation / General
  • R11: Urban, Rural, Regional, Real Estate, and Transportation Economics / General Regional Economics / Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
 
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