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The Role of Institutions in Growth and Development

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  • Daron Acemoglu
  • James Robinson

Abstract

In this paper we argue that the main determinant of differences in prosperity across countries are differences in economic institutions. To solve the problem of development will entail reforming these institutions. Unfortunately, this is difficult because economic institutions are collective choices that are the outcome of a political process. The economic institutions of a society depend on the nature of political institutions and the distribution of political power in society. As yet, we only have a highly preliminary understanding of the factors that lead a society into a political equilibrium which supports good economic institutions. However, it is clear that it is the political nature of an institutional equilibrium that makes it very difficult to reform economic institutions. We illustrate this with a series of pitfalls of institutional reforms. Our analysis reveals challenges for those who would wish to solve the problem of development and poverty. That such challenges exist is hardly surprising and we believe that the main reason for such challenges is the forces we have outlined in this paper. Better development policy will only come when we recognize this and understand these forces better. Nevertheless, some countries do undergo political transitions, reform their institutions, and move onto more successful paths of economic development. We also can learn a lot from these success stories.

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Bibliographic Info

Article provided by Università di Perugia in its journal Review of Economics and Institutions.

Volume (Year): 1 (2010)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:pia:review:v:1:y:2010:i:2:n:1

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Related research

Keywords: economic growth; development; institutions and political economy;

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Cited by:
  1. Andrea Filippo Presbitero, 2010. "Total public debt and growth in developing countries," Mo.Fi.R. Working Papers 44, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Hans Gersbach & Lars-H. Siemers, 2014. "Can democracy induce development? A constitutional perspective," Public Choice, Springer, vol. 159(1), pages 177-196, April.
  3. World Bank, 2012. "From Political to Economic Awakening in the Arab World : The Path of Economic Integration - Deauville Partnership Report on Trade and Foreign Direct Investment, Volume 1. Overview Report," World Bank Other Operational Studies 11886, The World Bank.
  4. Pierre PECHER, 2013. "Ethnic conflict, power dynamics and growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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