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Two Views on Institutions and Development: The Grand Transition vs. the Primacy of Institutions

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Author Info
Martin Paldam
Erich Gundlach

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Abstract

The Grand Transition (GT) view claims that economic development is causal to institutional development, and that many institutional changes can be understood as transitions occurring at roughly the same level (zones) of development. The Primacy of Institutions (PoI) view claims that economic development is a consequence of an exogenous selection of institutions. Our survey of the empirical evidence and our own estimates reveal that it is easy to find con-vincing evidence supporting either of the two views. Property rights do affect development as suggested by the PoI. However, democracy is mainly an effect of development as suggested by the GT. We conclude that the empirical results are far too mixed to allow for a robust assessment that one of the two views is true and the other false. This finding implies that focusing on institutional development is unlikely to be successful as the key strategy for the economic development of poor countries.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1315.

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Length: 40 pages
Date of creation: Mar 2007
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Handle: RePEc:kie:kieliw:1315

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Keywords: Grand transition; primacy of institutions; democracy; corruption; development;

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Find related papers by JEL classification:
B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian
O1 - Economic Development, Technological Change, and Growth - - Economic Development

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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.:
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  6. Gundlach, E & Rudman, D & Wossmann, L, 2002. "Second Thoughts on Development Accounting," Applied Economics, Taylor and Francis Journals, vol. 34(11), pages 1359-69, July. [Downloadable!] (restricted)
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  15. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06. [Downloadable!]
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  16. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June. [Downloadable!] (restricted)
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  1. Thorsten Drautzburg & Inna Melnykovska & Rainer Schweickert, 2008. "Which Membership Matters? External vs. Internal Determinants of Institutional Change in Transition Countries," Kiel Working Papers 1421, Kiel Institute for the World Economy. [Downloadable!]
  2. Ansgar Belke & Ingo Bordon & Inna Melnykovska & Rainer Schweickert, 2009. "Prospective Membership and Institutional Change in Transition Countries," Kiel Working Papers 1562, Kiel Institute for the World Economy. [Downloadable!]
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