SOME COUNTRIES PRODUCE SO MUCH MORE OUTPUT PER WORKER THAN OTHERS: Robustness of the Results 3

The seventh specification considers a measure of the density of economic activity, computed following the methods of Ciccone and Hall (1996). The density measure is constructed to have a theoretical coefficient of one— it would have precisely this value in Ciccone and Hall’s cross section of states. Here, however, in a cross section of countries, the variation in other determinants of output per worker is so large that it is difficult to measure the effects of density with much precision.


The results for the eighth specification are unexpected. This specification adds an indicator variable taking the value of 1 for countries that are categorized as capitalist or mixed-capitalist by the Freedom House (1994). The odd result is that the regression coefficient implies that capitalist countries produce substantially less output per worker than otherwise similar noncapitalist countries. In part, this reflects the particular definition of capitalism employed by the Freedom House. According to their classification, a number of sub-Saharan African economies are classified as capitalist.

The final specification of Table 6 adds a list of continent dummies to the instrument set.25 As with the other specifications, the coefficient on social infrastructure is unchanged by the addition of the continents to the instrument list. However, the overidentification test now rejects the restrictions, in part because African economies have lower output per worker than otherwise similar economies on other continents.