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A new way to link development to institutions,policies and geography

The paper aims to examine the role of institutions relative to economic policy and geography in explaining the differential level of development across countries over time. To that end, it attempts to construct a Development Quality Index (DQI) and an Institutional Quality Index (IQI) by using multivariate statistical method of principal components. It shows that (i) higher level of IQI along with economic policy and geography factors lead to a positive improvement in the level of DQI; and (ii) results remain robust for IQI and relatively robust for economic policy and geography even when it is compared across cross-section and panel data estimation for a set of 102 countries over 1980 to 2004. The results strongly indicate that institutions matter in the context of specific economic policy mixes and geography related factors illustrated by disease burden, etc. It demonstrates that relative influence of institutions varies across stages of development.

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Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 04-2008.

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Length: 50
Date of creation: 01 Mar 2008
Date of revision: Mar 2008
Handle: RePEc:gii:giihei:heidwp04-2008
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  1. Olsson, Ola & Hibbs Jr., Douglas A., 2000. "Biogeography and Long-Run Economic Development," Working Papers in Economics 26, University of Gothenburg, Department of Economics, revised 11 Aug 2000.
  2. William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," Working Papers 15, Center for Global Development.
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  11. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
  12. Resnick, Danielle & Birner, Regina, 2006. "Does good governance contribute to pro-poor growth?: a review of the evidence from cross-country studies," DSGD discussion papers 30, International Food Policy Research Institute (IFPRI).
  13. Masters, William A & McMillan, Margaret S, 2001. " Climate and Scale in Economic Growth," Journal of Economic Growth, Springer, vol. 6(3), pages 167-86, September.
  14. Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
  15. Pranab Bardhan, 2005. "Institutions matter, but which ones?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(3), pages 499-532, 07.
  16. John W. McArthur & Jeffrey D. Sachs, 2001. "Institutions and Geography: Comment on Acemoglu, Johnson and Robinson (2000)," NBER Working Papers 8114, National Bureau of Economic Research, Inc.
  17. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  18. L Alan Winters, 2004. "Trade Liberalisation and Economic Performance: An Overview," Economic Journal, Royal Economic Society, vol. 114(493), pages F4-F21, 02.
  19. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  20. Dasgupta, Partha & Weale, Martin, 1992. "On measuring the quality of life," World Development, Elsevier, vol. 20(1), pages 119-131, January.
  21. Jagdish N. Bhagwati, 2004. "In Defense of Globalization: It Has a Human Face," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 9-20, November-.
  22. Sebastian Edwards, 1997. "Openness, Productivity and Growth: What Do We Really Know?," NBER Working Papers 5978, National Bureau of Economic Research, Inc.
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