Tobias Ketterer, Post Doctoral Researcher at the Grantham Research Institute on Climate Change and the Environment, has been awarded the 2014 EPAINOS young scientist prize. The prize was awarded for his paper Institutions vs. geography – What drives economic growth in Europe’s NUTS-2 regions? The annual prize was awarded for a paper presented at this year’s European Regional Science Conference (ESRC) in St. Petersburg.


Institutions vs. geography – What drives economic growth in Europe’s NUTS-2 regions? – Abstract

The debate on whether institutions or geography in driving economic growth has been rife (e.g. Sachs, 2003 vs. Rodrik et al., 2004). Most of the empirical analyses delving into this debate have focused on world countries, whose geographical and institutional conditions differ widely. Subnational analyses considering groups of countries with, in principle, more similar institutional and geographical conditions have been limited and tended to highlight that geography is more important than institutions at subnational level. This paper aims to address whether this is the case by investigating how differences in institutional and geographical conditions have affected economic growth in Europe’s regions in the period 1995-2009. Using a newly developed dataset including regional quality of government indicators and geographical charactersitics, we employ 2-SLS and IV-GMM estimation techniques in the analysis, including a number of regional historical variables as instruments. Our results indicate that at a regional level in Europe institutions rule. Regional institutional conditions – and, particularly, government effectiveness and the fight against corruption – play an important role in shaping regional economic growth prospects. This does not imply, however, that geography is irrelevant. We find some evidence of geographical factors affecting regional growth. The impact of geography is nevertheless dwarfed by the overriding influence of institutions.

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