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Path Break versus Path Drift: A Comparative Approach to Explain Variations in Institutional Effects on Economic Growth

Larysa Tamilina and Natalya Tamilina

MPRA Paper from University Library of Munich, Germany

Abstract: This study introduces a comprehensive model of institutional grafting wherein cultural, structural, and political forces shape new legal institutions. The model is used to argue that a country’s growth rates are a function of the distance that the new legal institutions develop to these three forces. We further argue that the distance’s size varies depending on the mode of institutional change: drift phase or path break. We demonstrate that the distance is usually large during a path break but tends to be significantly smaller for institutions emerging in the drift phase. As such, the new legal institutions strongly impact economic growth in the drift phase and only modestly influence growth rates during institutional path change. In the latter case, the political dimension’s quality determines the success of both a country’s growth trajectories and institutional reforms. These propositions are tested empirically based on a sample of 106 countries derived from the POLITY IV Project’s website.

Keywords: Institutional economics; formal institutions; institutional change; institutional grafting (search for similar items in EconPapers)
JEL-codes: O17 O47 O57 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gro and nep-ore
Date: 2018-01-01
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