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The Link Between Fundamentals and Proximate Factors in Development

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  • Wolfgang Keller
  • Carol H. Shiue
Abstract
The paper introduces a framework for studying the hierarchy of growth factors, from deep to more immediate. The specific setting we examine is 18th and 19th century Germany, when institutional changes introduced by reforms and transportation improvements converged to create city growth. We assess the impact of institutions on growth by allowing two ways for institutions to affect growth. Institutions can directly affect growth, or it can impact on trade, which in turn affects growth. Once we separately quantify the link from institutions to trade, and trade to growth, the independent effect of institutions on growth is small. This suggests that part of what is often understood as trade's effect on growth can be attributed to institutional change. It is straightforward to apply this framework to other settings.

Suggested Citation

  • Wolfgang Keller & Carol H. Shiue, 2013. "The Link Between Fundamentals and Proximate Factors in Development," NBER Working Papers 18808, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18808
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    Cited by:

    1. Les Hannah, 2014. "Corporations in the US and Europe 1790-1860," Business History, Taylor & Francis Journals, vol. 56(6), pages 865-899, September.
    2. Liu, Dan & Meissner, Christopher M., 2015. "Market potential and the rise of US productivity leadership," Journal of International Economics, Elsevier, vol. 96(1), pages 72-87.
    3. Keller, Wolfgang & Shiue, Carol, 2013. "The Trade Impact of the Zollverein," CEPR Discussion Papers 9387, C.E.P.R. Discussion Papers.
    4. Erik Hornung, 2021. "Industrialisierung im Deutschen Reich: Welche Rolle spielte die öffentliche Infrastruktur?," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(4), pages 258-262, April.
    5. Carol H. Shiue, 2017. "Human capital and fertility in Chinese clans before modern growth," Journal of Economic Growth, Springer, vol. 22(4), pages 351-396, December.

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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