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Far-Flung Europe: What is the Economic Impact of Geography? John Luke Gallup [email protected] My Path to Geography ● Why are LDCs poor and often slow growing? ● ● Geographically isolated Tropical climate The Outermost Regions My Path to Geography ● Why are LDCs poor and often slow growing? ● ● ● Geographically isolated Tropical climate Outermost Regions ● ● ● Geographically isolated Tropical climate (for French regions) European institutions and investment Cross-Country Evidence ● ● Geographical isolation Access to sea-born trade Not distance per se Tropical Climate Disease, especially malaria Low agricultural productivity, especially for staples Robust Correlates of Growth 1 2 3 4 5 6 7 8 East Asian dummy Initial primary schooling Investment price Initial GDP per person % Land area tropical % Population near coast Initial falciparum malaria prevalence Initial life expectancy Sala-I-Martin et al. "Determinants of Long-Run Growth," 9/2004. AER GDP per person, Portugal, Madeira, and the Azores 24,000 22,000 GDP per person in 1995 Euros 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1980 1985 1990 PORTUGAL 1995 Madeira Azores 2000 Norte 2005 GDP per person, Spain and the Canary Islands 24,000 22,000 GDP per person in 1995 Euros 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1980 1985 1990 SPAIN 1995 Canaries Extremadura 2000 2005 GDP per person, France and Overseas Departments 24,000 22,000 GDP per person in 1995 Euros 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1980 1985 FRANCE 1990 Martinique Guadeloupe 1995 Reunion 2000 Guyane 2005 Corsica Continental Ultra-periphery Total Madeira 4 5 Madeira 3 Azores Martinique Reunion Canaries Azores Martinique Reunion Canaries Guyane Guadeloupe -1 0 1 2 Guyane Guadeloupe 5K 10K 20K 30K40K 5K 10K 20K 30K40K 5K GDP per person, 1980 (1995 Euros) 10K 20K 30K40K Tropical problems? ● Not agriculture ● ● ● ● Health ● ● ● Outermost regions are not growing staples All have volcanic soils except French Guiana Agriculture <= 4% of output (except for Azores, 10%) Not substantial mortality and morbidity due to tropical disease All malaria-free except for French Guiana There is no geography problem to explain for the economies of Outermost Regions Issues for the Outermost Regions ● Health ● Manufacturing ● Education ● Unemployment Infant Mortality as a Percentage of the National Average 295 300 181 200 147 147 179 149 131 150 100 50 Re un io n G ui an a Fr en ch ar t in iq ue M G ua de lo up e s Ca na rie M ad ei ra 0 Az or es % of National 250 Infectious and Parasitic Disease Mortality as a Percentage of National Average 187% 200% 149% 116% 100% 95% 82% 66% 60% io eu n R ch en Fr n na G tin iq ar M de ua G ui a ue e lo up s r ie an a C ei ad M A zo re ra s 0% Doctors per Person Compared to National Average 0% -5% -10% -15% -20% -25% -30% -35% -40% -29% -29% -36% -43% Az or es M ad ei ra Ca na rie s G ua de lo up e M ar t in iq Fr ue en ch G ui an a Re un io n -45% -22% -23% Hospital Beds per Person Compared to National Average 92% 100% 80% 66% 60% 40% 20% 20% 0% -22% -20% -18% -40% -44% -60% Azores Canaries Martinique -54% Reunion Manufacturing ● Depressed by transportation costs Manufacturing is about 15% of national output It is less than half that level in Outermost Regions A very small part of economy Comparative Advantage ● Tourism ● Services tied to networks beyond regions Capture benefits of globalization Depends on ● ● Participation in networks Education levels Education in Outermost Regions ● Highschool dropout rates Worst (or close to) of all regions of countries Guadeloupe is exception: at national average French Guiana and Azores are each worst in country by large margin ● Enrollment of 17 y.o.'s 10% lower than any other region Tertiary Enrollment Rate: Ratio of Regional to National 100% 90% 80% 80% 70% 60% 60% 60% 50% 50% 40% 40% 30% 30% 30% 20% 10% 0% Azores Madeira Canaries Guadeloupe Martinique French Guiana Reunion a M Re un ion Gu ya ne e pe ar t in iqu Gu ad elo u Fr an ce s Sp ain ad e ir Ca na rie M Az or es Po rtu ga l Eu ro zo ne Unemployment Rate (average 1999-2005) 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 a M Re un ion Gu ya ne e pe ar t in iqu Gu ad elo u Fr an ce s Sp ain ad e ir Ca na rie M Az or es Po rtu ga l Eu ro zo ne Long Term Unemployment Rate (> 1 year) 20 18 16 14 12 10 8 6 4 2 0