The impact of geographical factors on economic development: Evaluation of Europe and the Middle East

Abstract

Physical geography refers to exogenous factors, whereas socioeconomic geography concerns endogenous factors. This chapter determines the non-stochastic impact of exogenous factors on economic development, physical geography factors are treated as the basis for geographical factors. It presents a brief summary of the literature on the relationship between geographical factors and economic development. The chapter discusses the basic differences between regions by referencing general geographical features of the Middle Eastern and European regions. It estimates the impact of geographical factors specific to these regions on economic development. It adopts data available for 46 countries on GDP, latitude, natural resources, number of neighbouring countries and landlockedness. The objective of the analysis is twofold: detect spatial dependencies using LISA maps and univariate and bivariate Moran's I values and investigate for significant effects on GDP using spatial regression models. To begin the process of spatial regression estimation, the chapter considers the standard Lagrange multiplier (LM)-error and LM-lag test statistics.