Reconciling Acemoglu and Sachs: Geography, Institutions and Technology

By
Nima Veiseh
November 23, 2010

This paper attempts to reconcile two models for sustainable economic growth in developing countries. I develop an empirical and theoretical case for how the geographic landscape of a country determines the ease with which it can assimilate foreign technologies and establish institutions favorable to economic growth. I explore the threshold between the seemingly conflicting geographic (Sachs at al.) and institutional (Acemoglu et al.) theories, and economic growth. I do this by developing a technologically determinant, intermediate bifurcation where growth shifts from being geographically to institutionally driven after enough technology has been assimilated. My analysis finds that the rate of technological assimilation is determined by the landscape of a country. As the technology level increases, income level converges toward the level of developed countries. After reaching a certain threshold, however, economic growth appears to shift from being geographically driven to institutionally driven.