Economic Performance in a Cross-Section of U.S. Native American Economies

Institutions either promote or constrain economic performance, but which parts of institutions advance or restrict performance, and why do economies sharing similar institutions sometimes perform differently? This paper is a modest attempt at addressing a small part of these questions. It applies a novel model that is capable of separating infrastructural and superstructural effects of institutions on aggregate and average income across 84 U.S. Native American economies (USNAEs). It finds that USNAEs have much in common with developing countries inasmuch as their aggregate and average incomes depend mainly on the accumulation of physical capital and exogenously-given labor. However, resources and resource productivity are necessary but insufficient determinants of income for institutional reasons. Because of the apparent scarcity of physical capital, infrastructures that aid human capital formation (schools, hospitals, and the like) are inadequate, so that even when the local superstructure is generally accepting of external technology, the impact of human capital on performance remains modest. Clearly infrastructural and superstructural aspects of institutions are competitive rather than complementary, which weakens the Nelson-Phelps channel for transmitting external technology into USNAEs. One obvious policy implication is to improve extant infrastructures; another is to align the competing forces. How best to go ahead is left to further investigations.