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Poverty, Geography and Institutional Path Dependence

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  • Tebaldi, Edinaldo
  • Mohan, Ramesh

Abstract

Using seven alternative measures of the institutions, this study examines the impacts of the quality of institutions on poverty rates in developing countries. The estimates obtained using the instrumental variable method (2SLS) show that the quality of institutions is negatively related with poverty rates and explain a significant portion of the variation in poverty rates across countries. More precisely, the empirical results suggest that an economy with a robust system to control corruption, market-friendly policies, a working judiciary system, and in which people have freedom to exercise their citizenship will create the necessary conditions to promote economic development and reduce poverty. The results suggest that pro-poor policies aimed at reducing poverty should first consider improving the quality of institutions in developing countries as a pre-requisite for economic development and poverty eradication.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10201.

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Date of creation: Jul 2008
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Handle: RePEc:pra:mprapa:10201

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Keywords: Poverty Trap; Institutions; Development;

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  1. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2003. "The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth," CEPR Discussion Papers 3712, C.E.P.R. Discussion Papers.
  2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  3. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  4. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  5. Alberto Chong & César Calderón, 2000. "Institutional quality and poverty measures in a cross-section of countries," Economics of Governance, Springer, vol. 1(2), pages 123-135, 07.
  6. Rodrik, Dani, 2000. "Institutions For High-Quality Growth: What They Are And How To Acquire Them," CEPR Discussion Papers 2370, C.E.P.R. Discussion Papers.
  7. Sindzingre, Alice, 2005. "Explaining Threshold Effects of Globalization on Poverty: An Institutional Perspective," Working Papers RP2005/53, World Institute for Development Economic Research (UNU-WIDER).
  8. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09.
  9. Stephan Klasen, 2006. "Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators," Ibero America Institute for Econ. Research (IAI) Discussion Papers 142, Ibero-America Institute for Economic Research.
  10. A. Chong & C. Calderón, 2000. "Causality and Feedback Between Institutional Measures and Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 69-81, 03.
  11. Walter Enders & Gary Hoover, 2003. "The effect of robust growth on poverty: a nonlinear analysis," Applied Economics, Taylor and Francis Journals, vol. 35(9), pages 1063-1071.
  12. Tebaldi, Edinaldo & Elmslie, Bruce, 2008. "Do Institutions Impact Innovation?," MPRA Paper 8757, University Library of Munich, Germany.
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