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

The central equation estimated in this paper has only a single fundamental determinant of a country’s output per worker, social infrastructure. Our maintained hypothesis (already tested in part using the test of overidentifying restrictions) is that this relation does not omit other fundamental determinants of output per worker. For example, characteristics of an economy such as the size of government, the rate of inflation, or the share of high-tech goods in international trade are all best thought of in our opinion as outcomes rather than determinants. Just as investment in skills, capital and technologies, these variables are determined primarily by a country’s social infrastructure. loans for bad credit utah

To examine the robustness of our specification, we selected a set of candidates to be additional fundamental determinants and consider a range of specifications. These alternative specifications are reported in Table 6.

Specification Social

Infrastructure

Additional

Variable

OverID Test p-value Test Result <7e
1.5= GADP 5.410 .006 .769
(.394) Reject
2. S =Years Open 4.442 .131 1.126
(.871) Accept
3. Distance from Equator 5.079 0.062 .129 .835
(2.61) (2.062) Accept
4. Ethnolinguistic Fractional- 5.006 -0.223 .212 .816
ization (N=113) (.745) (.386) Accept
5. Religious Affiliation 4.980 See .478 .771
(N=121) (.670) Note Accept
6. Log(Population) 5.173 0.047 .412 .845
(.513) (.060) Accept
7. Log(C-H Density) 5.195 -.546 .272 .850
(.539) (1.11) Accept
8. Capitalist System 6.354 -1.057 .828 .899
Indicator Variable (1.14) (.432) Accept
9. Instruments: Main Set plus 4.929 .026 .812
Continent Dummies (.388) Reject

The first two specifications redefine measured social infrastructure to be either the GADP variable or the Sachs-Warner openness variable, rather than the average of the two. The results are similar to those in our main specification. When social infrastructure is measured by GADP alone, the overidentifying restrictions are rejected — some of the instruments appear to belong in the equation.
In the third specification, we treat distance from the equator as an included exogenous variable. The result, consistent with previous overidentifying tests, is little change in the coefficient on social infrastructure and a small and insignificant coefficient on distance from the equator. This supports our contention that the bulk of the high simple correlation between distance from the equator and economic performance occurs because historical circumstances lead this variable to proxy well for social infrastructure.