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Institutions versus Policies: A Tale of Two Islands

Author

Listed:
  • Henry, Peter B.

    (Stanford University)

  • Miller, Conrad

    (Stanford University)

Abstract

Recent work emphasizes the primacy of differences in countries' colonially-bequeathed property rights and legal systems for explaining differences in their subsequent economic development. Barbados and Jamaica provide a striking counter example to this long-run view of income determination. Both countries inherited property rights and legal institutions from their English colonial masters yet experienced starkly different growth trajectories in the aftermath of independence. From 1960 to 2002, Barbados' GDP per capita grew roughly three times as fast as Jamaica's. Consequently, the income gap between Barbados and Jamaica is now almost five times larger than at the time of independence. Since their property rights and legal systems are virtually identical, recent theories of development cannot explain the divergence between Barbados and Jamaica. Differences in macroeconomic policy choices, not differences in institutions, account for the heterogeneous growth experiences of these two Caribbean nations.

Suggested Citation

  • Henry, Peter B. & Miller, Conrad, 2008. "Institutions versus Policies: A Tale of Two Islands," Research Papers 2012, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:2012
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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP2012.pdf
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    References listed on IDEAS

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    1. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    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. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kerekes, Monika, 2012. "Growth miracles and failures in a Markov switching classification model of growth," Journal of Development Economics, Elsevier, vol. 98(2), pages 167-177.
    2. Anusha Chari & Peter Blair Henry, 2015. "Two Tales of Adjustment: East Asian Lessons for European Growth," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(1), pages 164-196, May.
    3. Reda Cherif & Fuad Hasanov, 2014. "Soaring of the Gulf Falcons; Diversification in the GCC Oil Exporters in Seven Propositions," IMF Working Papers 14/177, International Monetary Fund.
    4. Carvalho, Augusto & Guimaraes, Bernardo, 2018. "State-controlled companies and political risk: Evidence from the 2014 Brazilian election," Journal of Public Economics, Elsevier, vol. 159(C), pages 66-78.
    5. Morgan, Horatio M., 2013. "Financial Development and Economic Growth: New Lessons from Small Open Economies," MPRA Paper 49842, University Library of Munich, Germany.
    6. Douglas A. Irwin & Richard Sylla, 2010. "The Significance of the Founding Choices: Editors' Introduction," NBER Chapters,in: Founding Choices: American Economic Policy in the 1790s, pages 1-21 National Bureau of Economic Research, Inc.
    7. Randall Morck & Bernard Yeung, 2011. "Economics, History, and Causation," NBER Working Papers 16678, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

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