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Institutional Barriers and World Income Disparities

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  • Ping Wang
  • Tsz-Nga Wong
  • Chong K. Yip

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.

Suggested Citation

  • Ping Wang & Tsz-Nga Wong & Chong K. Yip, 2018. "Institutional Barriers and World Income Disparities," Review, Federal Reserve Bank of St. Louis, vol. 100(3), pages 259-279.
  • Handle: RePEc:fip:fedlrv:00105
    DOI: 10.20955/r.2018.259-79
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    References listed on IDEAS

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    1. John Rennie Short & Justin Vélez-Hagan & Leah Dubots, 2019. "What Do Global Metrics Tell Us about the World?," Social Sciences, MDPI, vol. 8(5), pages 1-16, May.

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    More about this item

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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