Institutions and Development: Are some more critical than others? – A Panel Study of 50 countries from 2002 to 2011

Strong institutions are often viewed as part answers to Africa’s development dilemma. But given the resource constraints of many African countries, one would need to be selective as to which institution or institutions to commit scarce resources. An attempt to strengthen all institutions at the same time could be rather daunting. And many questions would remain. First, what is the relative importance of one institution to another? Second, whether all institutions exert an equal impact on comprehensive development as they do on economic growth. This paper on Institutions and Development, first published in 2007 tries to answer these questions. It has been modified (in the 2016 version) for three reasons- 1, to bring the data up to date, 2, to use a different and possibly more accurate econometric model (fixed effect) for the analysis and 3, to assess if the same institutions remain more critical than others, as observed in 2007. Even though the rule of law institution would seem, in this revised version, to have a slightly better impact on GDP/Capita, government effectiveness is still dominant in both non-differenced and differenced models, especially when comprehensive development is considered.