Institutional Barriers and World Income Disparities

22 Pages Posted: 20 Jul 2018 Last revised: 19 Mar 2020

See all articles by Ping Wang

Ping Wang

Washington University in St. Louis - Department of Economics; National Bureau of Economic Research (NBER)

Tsz-Nga Wong

Washington University in St Louis

Chong Yip

The Chinese University of Hong Kong (CUHK)

Date Written: 2018

Abstract

Why have the income disparities between fast-growing economies and development laggards widened over the past five decades? How important is the role played by institutional barriers with relation to technology adoption? Using cross-country analysis, we find that more-severe institutional barriers in several representative lag-behind countries actually hinder the process of structural transformation and economic development, causing these countries to fall below a representative group of fast-growing economies despite having similar or even better initial states five decades ago. We also find that institutional barriers have played the most important role, accounting for more than half the economic growth in fast-growing and trapped economies and for more than 100 percent of the economic growth in the lag-behind countries. By conducting country studies, we identify that unnecessary protectionism, government misallocation, corruption, and financial instability have been key institutional barriers causing countries to either fall into the poverty trap or lag behind without a sustainable growth engine.

JEL Classification: O43, O41, O47

Suggested Citation

Wang, Ping and Wong, Tsz-Nga and Yip, Chong, Institutional Barriers and World Income Disparities (2018). Available at SSRN: https://ssrn.com/abstract=3217034 or http://dx.doi.org/10.20955/r.2018.259-79

Ping Wang (Contact Author)

Washington University in St. Louis - Department of Economics ( email )

One Brookings Drive
St. Louis, MO 63130
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tsz-Nga Wong

Washington University in St Louis ( email )

One Brookings Drive
St. Louis, MO 63130
United States

HOME PAGE: http://sites.google.com/site/tszngawong/

Chong Yip

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

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