Far-Flung Europe: What is the Economic Impact of Geography?

John Luke Gallupjlgallup@pdx.edu

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 East Asian dummy2 Initial primary schooling3 Investment price4 Initial GDP per person5 % Land area tropical6 % Population near coast7 Initial falciparum m alaria prevalence8 Initial life expectancy

Sala-I-M artin e t a l. "D eterm inants o f Long-R un G row th," AER 9/2004.

GD P p er person , P o rtu ga l, M ad e ira , and th e Azo res

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

1980 1985 1990 1995 2000 2005

GD

P p

er p

erso

n i

n 1

995

Eu

ros

P ORTUGA L M adeira A zores Norte

GD P p er person , S p a in and the C anary Is lan d s

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

1980 1985 1990 1995 2000 2005

GD

P p

er p

erso

n in

199

5 E

uros

S P A IN Canaries E x trem adura

GD P p er p erso n , F ran ce an d Overseas D ep artmen ts

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

1980 1985 1990 1995 2000 2005

GD

P p

er p

erso

n i

n 1

995

Eu

ros

FRA NCE M artinique Guadeloupe Reunion Guyane Cors ica

Canaries

Guadeloupe

Martinique

Guyane

Reunion

Azores

Madeira

Canaries

Guadeloupe

Martinique

Guyane

Reunion

Azores

Madeira

-10

12

34

5

5K 10K 20K 30K40K 5K 10K 20K 30K40K 5K 10K 20K 30K40K

Continental Ultra-periphery TotalG

DP

p.p

. Gro

wth

198

0-20

03 (

%)

GDP per person, 1980 (1995 Euros)

Tropical problems?

● Not agriculture● Outermost regions are not growing staples● All have volcanic soils except French Guiana● Agriculture <= 4% of output (except for Azores, 10%)

● Health● 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

147 147 149

181 179

295

131

0

50

100

150

200

250

300

Azore

s

Made ira

Ca naries

Gua delou pe

Marti

niqu e

French

Gu ia na

Reunion

% o

f N

atio

nal

In fec tio u s an d P aras itic D isease M o rta lityas a P ercen tag e o f Natio n a l Averag e

60%82%

95%116%

149%

187%

66%

0%

100%

200%

-23%-29%

-36%-29%

-43%

-22%

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

D o cto rs p er P erso n C o mp ared to Natio n a l Averag e

66%

92%

20%

-22% -18%

-44%-54%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

A zores Canaries M artinique Reunion

Hosp ita l B eds per P ersonC omp ared to Natio na l Average

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

T e rtiary E n ro llme n t R ate : R atio o f R e g io n al to N atio n al

40%

30%

80%

50%

60%

30%

60%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

A z ores Madeira Canar ies Guadeloupe Martin ique Frenc h Guiana Reunion

U ne mp lo y me nt R a te (a v e ra ge 1 9 9 9 -2 0 0 5 )

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

L o ng Te rm U ne mp lo y me n t R a te (> 1 y e a r)

02468

10

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