Geography Reference
In-Depth Information
access to seaport facilities is of little use without domestic scale. As such,
economic geography means that many of these countries will remain
trapped in poverty unless these island nations find ways to be deeply
integrated into a much larger economic system. Many isolated islands
and archipelagos suffer these problems, and they are particularly acute
for many islands in the Pacific, Indian and South Atlantic Oceans. Only
those whose political economy and institutional frameworks allow them
to be deeply integrated into a much larger home market, such as Hawaii or
Bermuda, are able to break this vicious economic geography circle.
Meanwhile, for landlocked countries, there is little point in trying to
improve infrastructure such as road or rail systems in an effort to make
the country more attractive for inward FDI as a means of fostering
domestic growth, unless the neighbouring countries also undertake com-
plementary and coordinated investments. Without absolute guarantees
that these multinational and cross-border investments will be undertaken
and maintained, no individual country has any incentive to develop such
infrastructures. These types of complementary investments require not
only institutional and governance coordination between adjacent coun-
tries in order to develop infrastructure, but also long term multinational
agreements regarding the pricing arrangements and the guaranteeing of
enforceable cross-border contracts regarding the distribution of the asso-
ciated costs and rents. The more fragmented is the cartographical geogra-
phy in terms of the number of countries which border each other and the
complexity of the geographical borders, the more difficult it is to achieve
these multinational agreements which would be beneficial to all. These
coordination problems are particularly acute in the case of countries with
potential sectors for producing manufactured goods or extracting land-
based raw materials, because these are commodities which require road
and rail transportation to port facilities, and cannot easily be profitably
bypassed by air-freight. In addition, small countries are particularly prone
to fostering narrowly-defined governing elites with powerful monopoly
and monopsony interests. Many members of these elites will have little
appetite for multinational agreements which potentially may undermine
their dominant social, political and economic positions, and those that
do support institutional innovations will find themselves under intense
peer- pressure.
These fragmentation-coordination problems have many elements which
are familiar in the 'tragedy of the commons' problem but they are institu-
tional problems which have explicitly economic geography underpinnings.
Yet, these problems are strangely absent in the analysis of Alesina and
Spolaore (2005). Indeed, the weakness of Alesina and Spolaore's argu-
ments is that they are asking questions about institutions, and in particular,
