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Institutions and growth: a developing country case study

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  • Luciano Nakabashi

    ()
    (Universidade Federal do Paraná)

  • Adolfo Sachsida

    ()
    (IPEA e CNPq)

  • Ana Elisa Gonçalves Pereira

    ()
    (Universidade Federal do Paraná)

Abstract

The Brazilian municipalities show an enormous inequality on its development level. Even within the states considered relatively prosperous, there are huge internal disparities on income levels. The richest Brazilian municipality's GDP per capita is about 190 times greater than the poorest municipality's, according to IBGE (2000) database. A possible explanation for this phenomenon relies on institutional theory. Many theoretical and empirical studies, mainly based on cross-country data, emphasize the role played by institutions on the determination of long run development. Nevertheless, there still is little research concerning the income differences within the national territory and its connection to institutional quality. The literature points out that institutions matter for the level of economic development because of their effects on political power distribution, generation of economic opportunities, innovation, human capital accumulation, and so on. Based on this assumption, the present study main goal is to analyze the effects of Brazilian municipalities' institutional quality on their GDP per capita levels. The results indicate that institutions are relevant and its importance is greater for large municipalities. On the other hand, human capital human capital is more important to small municipalities. To address the endogeneity problem inherent to the relationship between institutions and development, we employ the 2SLS method.

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Bibliographic Info

Paper provided by Universidade Federal do Paraná, Department of Economics in its series Working Papers with number 0116.

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Length: 18 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:fup:wpaper:0116

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Keywords: institutions; income level; brazilian municipalities;

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  1. Vladimir Kühl Teles & Carlos Pereira, 2008. "Political institutions matter for incipient but not for consolidated democracies: a political economy analysis of economic growth," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211539390, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  2. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions As The Fundamental Cause Of Long-Run Growth," DOCUMENTOS CEDE 002889, UNIVERSIDAD DE LOS ANDES-CEDE.
  3. Daniel Berkowitz & Karen Clay, 2003. "Initial Conditions, Institutional Dynamics and Economic Performance: Evidence from the American States," William Davidson Institute Working Papers Series 2003-615, William Davidson Institute at the University of Michigan.
  4. Naércio Menezes-Filho & Renato Leite Marcondes & Elaine Toldo Pazello & Luiz Guilherme Scorzafave, 2006. "Instituições E Diferenças De Renda Entre Os Estados Brasileiros: Uma Análise Histórica," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 70, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  5. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413.
  6. Joana Naritomi & Rodrigo R. Soares & Juliano J. Assunção, 2007. "Rent Seeking and the Unveiling of 'De Facto' Institutions: Development and Colonial Heritage within Brazil," NBER Working Papers 13545, National Bureau of Economic Research, Inc.
  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  8. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  9. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc.
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Cited by:
  1. Ana Elisa Gonçalves Pereira & Luciano Nakabashi, 2014. "Factors Of Production, Institutions And Development In Brazil," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 090, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

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