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Evidence on economic versus political institutions as determinants of development

Listed author(s):
  • Daniel L. Bennett

    (Patrick Henry College)

  • Hugo J. Faria

    (University of Miami)

  • James D. Gwartney

    (Florida State University)

  • Hugo M. Montesinos-Yufa

    (Florida State University & IESA)

  • Daniel R. Morales

    (IDEICE & Florida State University)

  • Carlos E. Navarro

    (IESA & Monteavila University)

Registered author(s):

    A growing body of evidence suggests that institutions are an important causal determinant of economic development, yet there remains considerable debate over which institutions are most important. In this paper, we employ an identification strategy that allows us to simultaneously examine the potential causal impact of economic and political institutions. The results of different instrumental variable estimators strongly suggest that economic institutions, gauged by the Index of Social Infrastructure and by the Economic Freedom of the World Index, are economically and statistically significant determinants of income per capita. However, political institutions, measured by Constraints on the Executive, exert smaller and less discernible statistical impact on development. These findings are robust to the inclusion of confounding factors that potentially influence development such as geography, ethnolinguistic fractionalization, human capital, as well as robust to a number of alternative sets of covariates, data sources, sample sizes, instrumental variables, and to tests that provide for valid inferences under near exogeneity.

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    File URL: http://bus.miami.edu/_assets/files/repec/WP2017-04.pdf
    File Function: First version, 2017
    Download Restriction: no

    Paper provided by University of Miami, Department of Economics in its series Working Papers with number 2017-04.

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    Date of creation: 24 May 2017
    Handle: RePEc:mia:wpaper:2017-04
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    Web page: http://www.bus.miami.edu/faculty-and-research/academic-departments/economics/index.html
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