The Geopolitical Determinants of Economic Growth, 1960-2024

Tianyu Fan

Papers from arXiv.org

Abstract: This paper establishes geopolitical relations as a first-order determinant of economic growth. We construct a novel event-based measure of bilateral alignment by employing large language models to compile 373,020 geopolitical events across 193 countries from 1960 to 2024. This comprehensive measure enables us to identify the precise timing and magnitude of geopolitical shifts. Exploiting within-country temporal variation with local projections, we find that a one-standard-deviation improvement in geopolitical relations increases GDP per capita by 10 percent over 20 years. These growth effects operate through multiple reinforcing channels, including domestic stability, investment, trade, and productivity. Over the sample period, geopolitical factors account for GDP variations ranging from -30 to +30 percent across countries.

Date: 2025-07, Revised 2025-11
New Economics Papers: this item is included in nep-cmp, nep-gro, nep-his and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2507.04833

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