Two Views on Institutional Development: The Grand Transition vs the Primacy of Institutions

Martin Paldam and Erich Gundlach

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: The Grand Transition (GT) view claims that economic development is causal to institutional development, and that many institutional changes can be understood as transitions occurring at roughly the same level (zones) of development. The Primacy of Institutions (PoI) view claims that economic development is a consequence of an exogenous selection of institutions. Our survey of the empirical evidence and our own estimates reveal that it is easy to find convincing evidence supporting either of the two views. Property rights do affect development as suggested by the PoI. However, democracy is mainly an effect of development as suggested by the GT. We conclude that the empirical results are far too mixed to allow for a robust assessment that one of the two views is true and the other false. This finding implies that focusing on institutional development is unlikely to be successful as the key strategy for the economic development of poor countries.

Keywords: Grand transition; primacy of institutions; democracy; corruption; development (search for similar items in EconPapers)
Pages: 36 pages JEL Classification: B25, O1
Date: 2007-06
New Economics Papers: this item is included in nep-dev, nep-pol, nep-soc and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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