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Investing In Institutions

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  • RYAN A. COMPTON
  • DANIEL C. GIEDEMAN
  • NOEL D. JOHNSON

Abstract

Robust institutional change is difficult to achieve. However, it is more difficult for some countries than others. We use data on 69 countries between 1870 and 2000 to show that political instability does not always affect growth outcomes. We then develop a simple model to explain this fact in which the likelihood that “good” institutions are abandoned during periods of political uncertainty depends on the opportunity cost of doing so. We operationalize our model by using contract intensive money as a proxy for this initial investment in growth‐enhancing institutions. Cross‐sectional and panel growth regressions support the model's predictions.

Suggested Citation

  • Ryan A. Compton & Daniel C. Giedeman & Noel D. Johnson, 2010. "Investing In Institutions," Economics and Politics, Wiley Blackwell, vol. 22(3), pages 419-445, November.
    • Handle: RePEc:bla:ecopol:v:22:y:2010:i:3:p:419-445
    DOI: 10.1111/j.1468-0343.2010.00370.x
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    1. Al-Ubaydli, Omar & McCabe, Kevin & Twieg, Peter, 2014. "Can More Be Less? An Experimental Test of the Resource Curse," Journal of Experimental Political Science, Cambridge University Press, vol. 1(1), pages 39-58, April.

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