Institutional Effect over Economic Growth: New Evidence for Latin America
In lieu of the institutional hypothesis of economic growth, an economic model and an econometric model are proposed to explore how important institutional settings were for economic performance during the first ten years of the new millennium in Latin America. According to instrumental variables models, institutional quality explains 1.13 and 1.09 of income differences for the decade 2000 - 2010, holding formal and informal structural characteristics constant. The highest average income was greater in a factor of 5,6 than the lowest average income so that, giving econometric results, institutional quality accounts for 20% of such income gap. Compared with short term gains, only Argentina, Chile and Uruguay seem to have been implemented changes in technical efficiency during the decade relevant for Total Factor Productivity levels.
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