Why Not Adopt Better Institutions?

Oxford Development Studies, Forthcoming

22 Pages Posted: 10 Aug 2008 Last revised: 10 Dec 2011

See all articles by Brian Kelleher Richter

Brian Kelleher Richter

University of Texas at Austin - Red McCombs School of Business

Jeffrey F. Timmons

NYU Abu Dhabi

Date Written: November 29, 2009

Abstract

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.

Keywords: Institutions, Long-run Growth, Political Economy, Development

JEL Classification: O4, N1, E0

Suggested Citation

Richter, Brian Kelleher and Timmons, Jeffrey F., Why Not Adopt Better Institutions? (November 29, 2009). Oxford Development Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1213138 or http://dx.doi.org/10.2139/ssrn.1213138

Brian Kelleher Richter (Contact Author)

University of Texas at Austin - Red McCombs School of Business ( email )

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Austin, TX 78712
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HOME PAGE: http://briankrichter.com/

Jeffrey F. Timmons

NYU Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates
(971) 262 84523 (Fax)

HOME PAGE: http://https://nyuad.nyu.edu/en/academics/faculty/jeffrey-timmons.html

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