Evidence on economic versus political institutions as determinants of development

Daniel Bennett, Hugo Faria, James Gwartney, Hugo Montesinos-Yufa, Daniel Morales and Carlos Navarro
Additional contact information
Daniel Bennett: Patrick Henry College
Hugo Faria: University of Miami
Hugo Montesinos-Yufa: Florida State University & IESA
Daniel Morales: IDEICE & Florida State University
Carlos Navarro: IESA & Monteavila University

No 2017-04, Working Papers from University of Miami, Department of Economics

Abstract: A growing body of evidence suggests that institutions are an important causal determinant of economic development, yet there remains considerable debate over which institutions are most important. In this paper, we employ an identification strategy that allows us to simultaneously examine the potential causal impact of economic and political institutions. The results of different instrumental variable estimators strongly suggest that economic institutions, gauged by the Index of Social Infrastructure and by the Economic Freedom of the World Index, are economically and statistically significant determinants of income per capita. However, political institutions, measured by Constraints on the Executive, exert smaller and less discernible statistical impact on development. These findings are robust to the inclusion of confounding factors that potentially influence development such as geography, ethnolinguistic fractionalization, human capital, as well as robust to a number of alternative sets of covariates, data sources, sample sizes, instrumental variables, and to tests that provide for valid inferences under near exogeneity.

Keywords: Comparative Economic Development; Institutions; Out of Africa Hypothesis; IV Estimators; Cognitive Skills. Publication Status: In Submission (search for similar items in EconPapers)
JEL-codes: I25 O10 O43 P10 (search for similar items in EconPapers)
Date: 2017-05-24
New Economics Papers: this item is included in nep-dev and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:mia:wpaper:2017-04

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