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Institutions and growth: a developing country case study

Luciano Nakabashi (), Adolfo Sachsida () and Ana Pereira ()
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Ana Pereira: Universidade Federal do Paraná

No 116, Working Papers from Universidade Federal do Paraná, Department of Economics

Abstract: The Brazilian municipalities show an enormous inequality on its development level. Even within the states considered relatively prosperous, there are huge internal disparities on income levels. The richest Brazilian municipality's GDP per capita is about 190 times greater than the poorest municipality's, according to IBGE (2000) database. A possible explanation for this phenomenon relies on institutional theory. Many theoretical and empirical studies, mainly based on cross-country data, emphasize the role played by institutions on the determination of long run development. Nevertheless, there still is little research concerning the income differences within the national territory and its connection to institutional quality. The literature points out that institutions matter for the level of economic development because of their effects on political power distribution, generation of economic opportunities, innovation, human capital accumulation, and so on. Based on this assumption, the present study main goal is to analyze the effects of Brazilian municipalities' institutional quality on their GDP per capita levels. The results indicate that institutions are relevant and its importance is greater for large municipalities. On the other hand, human capital human capital is more important to small municipalities. To address the endogeneity problem inherent to the relationship between institutions and development, we employ the 2SLS method.

Keywords: institutions; income level; brazilian municipalities (search for similar items in EconPapers)
JEL-codes: C13 O11 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2011
New Economics Papers: this item is included in nep-cse, nep-fdg and nep-soc
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Journal Article: Institutions and growth: a developing country case study (2013) Downloads
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