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Institutional and Non-Institutional Explanations of Economic Differences

  • Stanley L. Engerman
  • Kenneth L. Sokoloff

Although we cannot conceive of processes of economic growth that do not involve institutional change, in this essay we outline some reasons why one should be cautious about grounding a theory of growth on institutions. We emphasize how very different institutional structures have often been found to be reasonable substitutes for each other, both in dissimilar as well as similar contexts. The historical record, therefore, does not seem to support the notion that any particular institution, narrowly defined, is indispensable for growth. Moreover, we discuss how the evidence that there are systematic patterns to the ways institutions evolve undercuts the idea that exogenous change in institutions is what powers growth. Institutions matter, but our thinking of how they matter should recognize that they are profoundly influenced by the political and economic environment, and that if any aspect of institutions is crucial for growth, it is that institutions change over time as circumstances change.

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File URL: http://www.nber.org/papers/w9989.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9989.

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Date of creation: Sep 2003
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Publication status: published as Menard, Claude and Mary M. Shirley. Handbook of New Institutional Economics. Dordrecht and New York: Springer, 2005.
Handle: RePEc:nbr:nberwo:9989
Note: DAE
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  1. Khan, B. Zorina, 1996. "Married Women's Property Laws and Female Commercial Activity: Evidence from United States Patent Records, 1790–1895," The Journal of Economic History, Cambridge University Press, vol. 56(02), pages 356-388, June.
  2. Easterly, William & Levine, Ross, 2003. "Tropics, germs, and crops: how endowments influence economic development," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 3-39, January.
  3. Stanley L. Engerman & Kenneth Lee Sokoloff, 2002. "Factor Endowments, Inequality, and Paths of Development among New World Economies," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  4. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  5. Kenneth L. Sokoloff, 1988. "Inventive Activity in Early Industrial America: Evidence From Patent Records, 1790 - 1846," NBER Working Papers 2707, National Bureau of Economic Research, Inc.
  6. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
  7. Patrick K. O'Brien, 1988. "The political economy of British taxation, 1660-1815," Economic History Review, Economic History Society, vol. 41(1), pages 1-32, 02.
  8. Kenneth L. Sokoloff & Stanley L. Engerman, 2000. "Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 217-232, Summer.
  9. Domar, Evsey D., 1970. "The Causes of Slavery or Serfdom: A Hypothesis," The Journal of Economic History, Cambridge University Press, vol. 30(01), pages 18-32, March.
  10. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
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