Abundant empirical evidence links well-functioning institutions and good governance to better economic and social outcomes. It is thus an important challenge to determine which conjunction of factors produces better institutions. Along this line, the objective of this paper is twofold. First, it examines the existing results of the literature on this matter in a critical way, tries to assess their robustness, and explores alternative methodology. Second, it makes use of a more comprehensive database, including all the aspects previously analyzed in a separate manner, to derive systematic empirical results. After discussing the traditional robustness checks employed, for example, in the empirical growth literature, which appear to be of limited usefulness, we introduce factor analysis as a preliminary step toward model specification and subsequently perform multiple regression analysis. Of the four levels of explanation that we identify, namely control and historical variables, the nature of the political game, the size and nature of existing rents to be allocated, and the nature and quality of bureaucratic incentives, the later appears to be the more clearly linked to institutional quality. However, the results prove not robust when dealing with endogeneity problems. Various kinds of interactions and non-linear effects are also investigated, yielding no clear insights. We conclude regarding the fragility of existing data, in particular with respect to the incentive structure, and the need for a better theoretical understanding of the underlying mechanisms.
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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers with number
4215.
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert Vishny, 1998.
"The Quality of Goverment,"
NBER Working Papers
6727, National Bureau of Economic Research, Inc.
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