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Institutions and growth: a developing country case study

Author

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  • Luciano Nakabashi

    () (Universidade Federal do Paraná)

  • Adolfo Sachsida

    () (IPEA e CNPq)

  • Ana Elisa Gonçalves Pereira

    () (Universidade Federal do Paraná)

Abstract

The Brazilian municipalities show an enormous inequality on its development level. Even within the states considered relatively prosperous, there are huge internal disparities on income levels. The richest Brazilian municipality's GDP per capita is about 190 times greater than the poorest municipality's, according to IBGE (2000) database. A possible explanation for this phenomenon relies on institutional theory. Many theoretical and empirical studies, mainly based on cross-country data, emphasize the role played by institutions on the determination of long run development. Nevertheless, there still is little research concerning the income differences within the national territory and its connection to institutional quality. The literature points out that institutions matter for the level of economic development because of their effects on political power distribution, generation of economic opportunities, innovation, human capital accumulation, and so on. Based on this assumption, the present study main goal is to analyze the effects of Brazilian municipalities' institutional quality on their GDP per capita levels. The results indicate that institutions are relevant and its importance is greater for large municipalities. On the other hand, human capital human capital is more important to small municipalities. To address the endogeneity problem inherent to the relationship between institutions and development, we employ the 2SLS method.

Suggested Citation

  • Luciano Nakabashi & Adolfo Sachsida & Ana Elisa Gonçalves Pereira, 2011. "Institutions and growth: a developing country case study," Working Papers 0116, Universidade Federal do Paraná, Department of Economics.
  • Handle: RePEc:fup:wpaper:0116
    Note: Creation Date corresponds to the year in which the paper was published on the Department of Economics website. The paper may have been written a small number of months before its publication date.
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    References listed on IDEAS

    as
    1. Daniel Berkowitz & Karen Clay, "undated". "Initial Conditions, Institutional Dynamics and Economic Performance: Evidence from the American States," American Law & Economics Association Annual Meetings 1083, American Law & Economics Association.
    2. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," NBER Working Papers 10481, National Bureau of Economic Research, Inc.
    3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1231-1294.
    4. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    5. Naércio Menezes-Filho & Renato Leite Marcondes & Elaine Toldo Pazello & Luiz Guilherme Scorzafave, 2006. "Instituições E Diferenças De Renda Entre Os Estados Brasileiros: Uma Análise Histórica," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 70, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    6. Joana Naritomi & Rodrigo R. Soares & Juliano J. Assunção, 2007. "Rent Seeking and the Unveiling of 'De Facto' Institutions: Development and Colonial Heritage within Brazil," NBER Working Papers 13545, National Bureau of Economic Research, Inc.
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    8. Vladimir Kühl Teles & Carlos Pereira, 2008. "Political institutions matter for incipient but not for consolidated democracies: a political economy analysis of economic growth," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211539390, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
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    Cited by:

    1. Ana Elisa Gonçalves Pereira & Luciano Nakabashi, 2014. "Factors Of Production, Institutions And Development In Brazil," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 090, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Pedro H. Leivas & Anderson M.A. dos Santos, 2016. "Patterns and trends of group-based inequality in Brazil," WIDER Working Paper Series 127, World Institute for Development Economic Research (UNU-WIDER).
    3. Edward Nissan & Farhang Niroomand, 2015. "Gender and Spatial Educational Attainment Gaps in Turkey," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(1), pages 102-109, January.

    More about this item

    Keywords

    institutions; income level; brazilian municipalities;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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