Models of electoral competition often follow Downs (1957) and allow candidates to freely adjust their positions in the issue space to capture the majority of voters. The result, in a two-candidate election with a single dimensional policy space and single peaked preferences, is both candidates adopting the position of the median voter. Such convergence is rarely observed and is potentially at odds with the party polarization cited by the media and academics (e.g. Poole and Rosenthal (1991)).
At its most basic level, corporate finance concerns the choice of new investments and decisions about how to finance those investments. Each of these decisions has been studied extensively, but usually in isolation from the other. However, it may be inappropriate to study financing and investment decisions separately. New investments must be financed, and the financing decision may it self affect firm value by changing investors expectations. The connections between capital structure and investment decisions should be most apparent when a firm undertakes a large investment (Mayer and Sussman [2004]).
Recent economic debate has reopened the old question of the wealth and poverty of nations. The answer to this question involves all aspects of human life: education, religion, institutions, technology, the diffusion of knowledge and, more recently, geography. The latter, it is said, has contributed to shaping the destiny of nations and their people (although not inescapably). For instance, Diamond (1999) states “History followed different courses for different peoples because of differences among people’s environments.”
The idea that geographical and environmental factors have influenced social development is not new. Landes (1999) argues that European economic advantages are the result, in part, of the favorable rainfall patterns and mild seasonal differences that allowed Europeans to raise bigger and better animals than those of other lands. Larger animals brought the agricultural, transport and military advantages that reinforced Western European economic leadership for several centuries. Geography has clearly had some effect on the shaping of the economic history of countries and regions. However, the amount by which geographical factors affect current income per capita and economic development variations is a question that is beginning to be answered. In this paper we will attempt to establish an answer to this question in terms of Colombian inter-regional income per capita variations.
