Journal
JOURNAL OF ECONOMIC GROWTH
Volume 9, Issue 3, Pages 271-303Publisher
SPRINGER
DOI: 10.1023/B:JOEG.0000038933.16398.ed
Keywords
economic development; economic growth and aggregate productivity; political economy; property rights; institutions
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We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulatioin lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that (a) human capital is a more basic source of growth than are the institutions, (b) poor countries get out of poverty through good policies, often pursued by dictators, and (c) subsequently improve their political institutions.
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