Sunday, April 10, 2011

Political Science Meets the Solow Model

At first glance, the Solow model’s dependence on the depreciation rate seems fine, but when we recognize that depreciation is lowest in temperate regions, and highest in tropical and arctic ones, it starts to get you thinking about whether geography is destiny.

In political science, this is a new idea, Written up in the April 9-10 issue of The Wall Street Journal in a weekly column called “Week In Ideas” was this:

… There were just two democracies, Cyprus and Israel, and 14 "persistent" autocracies among countries with an average annual rainfall of less than 21½ inches. Between 21½ inches and 51 inches, there were 18 stable democracies (out of a total of 26 in the data set) and seven persistent autocracies. Above 51 inches, the balance tipped back to closed societies. That relationship persisted even when colonial history, the presence of oil and ethnic division were controlled for.

We assume that depreciation is a negative cause of growth. That doesn’t imply that this correlation between rainfall and autocracy is causal, but it is suggestive.

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