Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships

Roberto Rigobon and Dani Rodrik

No 10750, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We estimate the interrelationships among economic institutions, political institutions, openness, and income levels, using identification through heteroskedasticity (IH). We split our cross-national dataset into two sub-samples: (i) colonies versus non-colonies; and (ii) continents aligned on an East-West versus those aligned on a North-South axis. We exploit the difference in the structural variances in these two sub-samples to gain identification. We find that democracy and the rule of law are both good for economic performance, but the latter has a much stronger impact on incomes. Openness (trade/GDP) has a negative impact on income levels and democracy, but a positive effect on rule of law. Higher income produces greater openness and better institutions, but these effects are not very strong. Rule of law and democracy tend to be mutually reinforcing.

JEL-codes: C33 F10 F43 O40 (search for similar items in EconPapers)
Date: 2004-09
New Economics Papers: this item is included in nep-dev, nep-lam, nep-pke and nep-reg
Note: EFG IFM ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (98)

Published as Rigobon, Roberto and Dani Rodrik. "Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships." The Economics of Transition 13, 3 (2005): 533-64.

Downloads: (external link)
http://www.nber.org/papers/w10750.pdf (application/pdf)

Related works:
Working Paper: Rule of Law, Democracy, Openness and Income: Estimating the Interrelationships (2004)
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:nbr:nberwo:10750

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10750

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().