Dr. Montesinos-Yufa’s dissertation takes a look at the three main hypotheses that have been proposed to explain the fundamental causes of growth and economic development.
Chapter 2 of this dissertation explores the hypothesis that geographic conditions associated with climate and time impact development advisedly, and how this impact, if any, may have changed over time. In this chapter, Dr. Montesinos-Yufa constructs an index of geographic disadvantage based on climate and location variable, and identifies the most geographically disadvantaged countries according to this index. Geographic conditions are found to affect development adversely, both directly and indirectly through the quality of institutions, mainly through economic institutions and international trade. Even though the adverse impact of geography has declined over time, in part due to technological innovations, there remains a substantial geographic handicap on the relative levels of per capita GDP, poverty rate, and trade. In other words, the digital revolution of recent decades, in turn, is potentially impacting all countries, including the most geographically disadvantaged.
The hypothesis that institutions are the main cause of economic development is analyzed in Chapter 3 with an emphasis on disentangling the roles of economic and political institutions. A causal link supporting the institutional hypothesis is established using ancestral instrumental variables as an exogenous source of variation in economic institutions. Chapter 3 also explores the relationship between political and economic institutions. Reforms towards inclusive political institutions typically occur first, followed by reforms towards inclusive economic institutions. The findings are consistent with the view that economic institutions are, at least partially, an outcome of the political process.
Chapter 4 turns the attention to human capital and its potential dual role as both a cause and a consequence of development. Dr. Montesinos-Yufa’s dissertation finds evidence consistent with all three theories using an integrated approach and better quality data than previously used in the literature. The evidence indicates an important dual role of human capital in the development process, as both input and output. The findings suggest that there is a virtuous cycle of growth and human capital accumulation: levels and increases in human capital lead to growth and, in turn, growth leads to improvements in human capital. Educational achievement outperforms educational attainment in income regressions, suggesting that the former is a more accurate measure of human capital than the latter and that schooling does not necessarily imply learning. Indeed, an essential part of human capital occurs at home. This research finds that the education of the parents and grandparents, the family size, the number of books at home, the expected occupational status at age 30, and the teaching environment at the school, are all key determinants of learning, explaining almost 40 percent of the variation in individual-level achievement scores.
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