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Extractive institutions in non-tradeable industries

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  • Vanino, Enrico
  • Lee, Stevan

Abstract

We are interested in the hypothesis that in order to promote export competitiveness and create jobs, it is necessary to address major distortions to prices in the non-tradeable sector. Exports drive growth in developing countries, yet most employment growth is generated in non-tradeable sectors. We contribute to the previous literature by explaining how non-tradeable sectors are particularly vulnerable to distortions arising from extractive and poor quality institutions. We estimate an IV-GMM model on a sample of low-middle income countries, finding evidence of a strong relationship between the growth of non-tradeable prices and the quality of local institutions. Overlooking the distortions in non-tradeable sectors could limit the analysis of constraints to economic growth and transformation in developing countries.

Suggested Citation

  • Vanino, Enrico & Lee, Stevan, 2018. "Extractive institutions in non-tradeable industries," LSE Research Online Documents on Economics 88101, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:88101
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    File URL: http://eprints.lse.ac.uk/88101/
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    More about this item

    Keywords

    Non-tradeable; Institutional quality; Extractive institutions; Economic development;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • H1 - Public Economics - - Structure and Scope of Government
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L8 - Industrial Organization - - Industry Studies: Services
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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