Geography and Regional Economic Growth: The high cost of deviating from nature

We analyze the role of nature and geography in determining economic and social outcomes. We propose a theoretical model relating geography and nature to economic growth, and examine that model using data from NUTS 2 European regions. By doing this, we identify the predictive power of first-nature va...

Full description

Saved in:
Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Albalate, Daniel, Bel, Germà, Mazaira-Font, Ferran A
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2020
Subjects
Economic growth
Online AccessGet full text

Cover

More Information
Summary:We analyze the role of nature and geography in determining economic and social outcomes. We propose a theoretical model relating geography and nature to economic growth, and examine that model using data from NUTS 2 European regions. By doing this, we identify the predictive power of first-nature variables to explain regional population distribution. Then we analyze the effects of misadjustment between the actual and predicted distribution of populations on economic performance. Our results indicate that deviating from first-nature outcomes has a significant negative effect on economic growth. Furthermore, we find that departing from natural endowment has a negative effect on social cohesion. The main policy implication emerging from our analysis is that strategies that harmonize with nature and geography yield better social welfare and human well-being than those policies that conflict with them.