Lecture 2: Geography

Question 1

How does Geography affect Development?

Answer 1

Some countries are ‘doomed’ to not develop

Tropical: 1.5% points slower growth; 7 years lower life expectancy
Landlocked: 0.6% points slower growth

also Africa and east Asian countries most underdeveloped

Question 2

Why? does geography affect development

Answer 2

1. Transportation and coordination costs limit trade and globalization
2. Climate limits agricultural and labour productivity(Sachs 2001)
3. Burden of tropical disease reduces growth by 1% point 627,000 people died of malaria in 2020(CDC 2021)
4. ‘Eurasian’ crops, animals and technologies cannot be transferred to tropical contexts(Diamond 1997)
5. Vulnerability to natural disasters damages infrastructure and causes conflict
   (Harari and La Ferrara 2012)

Question 3

why is geography not enough?

Answer 3

1. Tropical/landlocked countries can develop
   °Singapore, Shenzhen/Guangzhou, Costa Rica;Botswana, Switzerland
   °Challenges are not permanent, eg. Cuba,Paraguay have eliminated malaria
2. Local variations in development where geography is fixed
   Even with the same geography, development levels can differ significantly
3. A lack of convergence
   °Differences in crops, animals and technologies have been eradicated by trade
   °Why is Nicaragua still poor today?
4. A ‘reversal of fortunes’
   °The US has overtaken Latin America
   °But Central America has not, despite hosting the Mayans and Aztec
   Tropical and landlocked places used to be rich geography hasn’t changed

Question 3

4. How do Natural Resources affect Development?

Answer 3

Resource curse –> Countries with natural resources are poorer not richer

Question 4

Economic Effects: of the resources

Answer 4

1. Commodity prices decline relative to manufactured goods over time – the Prebisch-Singer Hypothesis
2. Commodity (raw material) prices are volatile
3. No spillovers to the rest of the economy
4. Dutch Disease - Selling commodities pushesup the exchange rate, harming other exports
5. Male-dominated mining areas create gendered risks and inequality
   °Eg. an increase in HIV/AIDS (de Soysaand Gizelis 2013)
   °Eg. La Rinconada, Peru - 4,500 womensex trafficked (>10% of the population)(Miranda 2016)
   °But all can be mitigated and managed withcareful government action (Ross 1999)
   Stabilization funds,
   Investing in diversification(Atlas of Economic Complexity 2023)

Question 5

Political Effects: of the resources

Answer 5

1. Myopia: Due to ‘easy’ money that finances patronage
   But leaders often try to stay for decades
2. Capture/Corruption: Beneficiary interest groups
   °(subsidized industries) lobby to keep rents
   °But resource states are rich enough to resist
3. Authoritarianism: Leaders more secure and transition to democracy less likely
   °But more revenue also reduces elite’s fear of taxation under democracy
4. Conflict: Extortion & fighting for resource control
   °But resources can fund security forces
5. Rentier states: Competition focused on controlling the state for wealth
   °Less need for tax collection undermines the
   social contract

Question 6

Political Rents

Answer 6

Definition:
Unearned incomes gained through political influence rather than productive efforts.

Key Features:
Often linked to resource wealth
Common in corrupt systems, where elites use political power to secure economic benefits.
Examples:
🔹 Leaders using oil revenues to fund patronage networks.
🔹 Powerful groups lobbying for subsidies or favorable regulations to maintain their wealth.

Impact:
Weakens economic efficiency.
Reduces government accountability.
Can fuel authoritarianism and conflict.

Question 7

Under what conditions do natural resources harm development?

Answer 7

1. When they generate large, state-controlled rents
2. When resources are controlled by nationalized firms (Ross 2012)
3. When institutions are weak already (Mehlum et al 2006)
   When the political institutions are weak biggest effect of the natural resources!