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Further Unbundling Institutions

Listed author(s):
  • Braunfels, Elias

    ()

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

This paper analyzes the effects of institutions on economic development, and focuses on separating political institutions from contracting and economic institutions. For a sample of former European colonies, I find that differences in income levels are strongly a ected by political institutions, which regulate political accountability and constrain political elites. There is some evidence for a positive e ect of economic institutions, which protect property rights, but no evidence for positive e ects of contracting institutions, which facilitate contracting among individuals. A decomposition of GDP reveals that political institutions work through the channel of physical and human Capital accumulation. Economic institutions have a positive impact on total factor productivity. To identify and unbundle effects, I exploit exogenous variation in each of the three institutions using instrumental variables based on Colonial history and geographic endowments. The application of a recently developed test for weak instruments in the multiple endogenous variables setting shows that the e ects of institutions can be separated. The paper adds to the literature by identifying the fundamental importance of political institutions for economic development, and provides an inside into the channels through which speci c institutions a ect income levels.

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File URL: https://brage.bibsys.no/xmlui/handle/11250/2413514
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Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 13/2016.

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Length: 51 pages
Date of creation: 19 Sep 2016
Handle: RePEc:hhs:nhheco:2016_013
Contact details of provider: Postal:
NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Phone: +47 55 959 277
Fax: 5595 9100
Web page: http://www.nhh.no/sam/
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