Why Not Adopt Better Institutions?
Brian Kelleher Richter
University of Texas at Austin - Red McCombs School of Business
Jeffrey F. Timmons
IE Business School
November 29, 2009
Oxford Development Studies, Forthcoming
According to Acemoglu, Robinson and Johnson (2002), institutional divergence prior to the Industrial Revolution is the fundamental cause of differences in income levels across countries. To quantify the impact of institutions on long-run growth rates that drive the differences in levels, we adapt their baseline regression. We estimate that improving institutional quality by one standard deviation in their model would have improved a country's average annual growth rate by only 0.4% over the period from 1820 to 1995. Finite-lived leaders may have preferred the private benefits of expropriation to modest short-run increases in their country's growth rate, despite the clear long-run benefits of improving institutional quality.
Number of Pages in PDF File: 22
Keywords: Institutions, Long-run Growth, Political Economy, Development
JEL Classification: O4, N1, E0working papers series
Date posted: August 10, 2008 ; Last revised: December 10, 2011
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