Institutions, Ratings and Economic Growth: In Search of Reliable Indicators
21 Pages Posted: 18 Jan 2014
Date Written: December 31, 2013
The ratings of political institutions are well-known and widely used in academic literature. These ratings are mostly based on expert evaluations. However, such evaluations can be subjective and occasionally driven by ideological considerations. In this paper we propose two new indicators of institutional quality for 154 countries. These indicators are constructed in a way that minimizes the subjectivity of the evaluations. Only the presence or absence of a particular institutional phenomenon is identified. This puts much less weight on possible bias and makes easy to verify. We show that these indices predict economic growth better than those commonly used, primarily because they include information about institutions that has been accumulated over a period of approximately two centuries.
Keywords: Rule of Law, Democracy, Limited Government, Institutions, Indicators, Economic growth
JEL Classification: P50, N40, O43
Suggested Citation: Suggested Citation