EconPapers    
Economics at your fingertips  
 

Identifying the effect of institutions on economic growth

Frédéric Docquier ()

No 2013030, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This chapter describes how institutional quality can be measured, quantifies the correlation between institutional and economic developments, and reviews and discusses the literature on the causal impact of institutions on growth. Identifying a causal effect of institutions on development, and understanding the technology of the transmission of institutional quality to growth are challenging issues. This is due to the difficulty (i) of disentangling the causal and reversing the causal effects, (ii) of accounting for unobserved shocks affecting both institutions and growth, and (iii) of capturing the lag structure of the relationship. To address these problems, existing cross-country studies have instrumented institutional quality using variables reflecting the settlement decisions of colonizers and imperial powers between the 16th and the 19th century. While fully recognizing the merits and the methodological rigor of this literature, I show that the type of institution implemented by imperial powers was statistically linked to unobserved factors affecting long-run economic performance. Hence, the quantitative predictions of these studies must be used with caution. Alternatively, collecting long-run data on institutional and economic changes, and searching for quasi-natural experiments (comparing the dynamics of countries which were initially similar and experienced different, unexpected institutional shocks) are promising research avenues.

New Economics Papers: this item is included in nep-his
Date: 2013-11-18
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://sites.uclouvain.be/econ/DP/IRES/2013030.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2013030

Access Statistics for this paper

More papers in Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().

 
Page updated 2019-06-16
Handle: RePEc:ctl:louvir:2013030