Economic development and sub-regional identities

Abstract

This study argues that the regions classified by the World Bank are not coherent in terms of economic structures. The special identities within each region dictate that the economic performance in different sub-regions should be determined independently. Embracing Barro’s (1991) regional uniqueness analysis, each region is divided according to distinctive characteristics. A fixed effects unbalanced panel model for 185 countries over the period 1970–2012 is used. The results indicate that explanatory variables responded differently in each group, which indicates the significant effect of the identities used to determine the division of the regions. Based on our findings, this study recommends that governments should act as follows: (1) adjust their policies so that the population grows according to the growth requirements, (2) rationalize the management of natural resource-revenues and establish a multi-sectored economy, and (3) enhance political rights and civil liberties in addition to fighting corruption.