IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/25909.html
   My bibliography  Save this paper

Institutions and economic performance: a review of the theory and evidence

Author

Listed:
  • Ugur, Mehmet

Abstract

The aim of this article is to take stock of the theoretical debate and empirical findings concerning the impact of institutions on economic performance and the channels through which the institutional impact unfolds. The review is limited to work published until 2004 due to space limitations and the exponential increase in the literature after 2004 – a development that justifies a separate review in itself. We trace the evolution of the institutional approach, identify the channels through which institutional quality might affect economic performance, report the empirical findings, and assess the institutional approach’s contribution to economic analysis and policy design. Our findings suggest that the institutional approach has made both theoretical and empirical contributions to economics research and has inspired policy debate, but the debate is lopsided with its focus on developing countries only.

Suggested Citation

  • Ugur, Mehmet, 2010. "Institutions and economic performance: a review of the theory and evidence," MPRA Paper 25909, University Library of Munich, Germany, revised Oct 2010.
    • Handle: RePEc:pra:mprapa:25909
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/25909/1/MPRA_paper_25909.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ronald H. Coase, 2008. "The Institutional Structure of Production," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 2, pages 31-39, Springer.
    2. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    3. Dani Rodrik, 2006. "Institutions for High-Quality Growth: What They Are and How to Acquire Them," Chapters, in: Kartik Roy & Jörn Sideras (ed.), Institutions, Globalisation and Empowerment, chapter 2, Edward Elgar Publishing.
    4. Rodrik, Dani, 1999. "Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses," Journal of Economic Growth, Springer, vol. 4(4), pages 385-412, December.
    5. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    6. Campos, Nauro F., 2000. "Context is everything : measuring institutional change in transition economies," Policy Research Working Paper Series 2269, The World Bank.
    7. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 613-646.
    8. 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.
    9. BRUNETTI, AYMO AART OLIVER & Kisunko,Gregory & Weder,Beatrice Silvia, 1997. "Institutional obstacles to doing business : region-by-region results from a worldwide survey of the private sector," Policy Research Working Paper Series 1759, The World Bank.
    10. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    11. Grigorian, David A. & Martinez, Albert, 2000. "Industrial growth and the quality of institutions : what do (transition) economies have to gain from the Rule of Law?," Policy Research Working Paper Series 2475, The World Bank.
    12. Helliwell, John F., 1994. "Empirical Linkages Between Democracy and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 24(2), pages 225-248, April.
    13. Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
    14. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    15. Jeffrey D. Sachs, 2001. "Tropical Underdevelopment," NBER Working Papers 8119, National Bureau of Economic Research, Inc.
    16. Clarke, George, 2001. "How the quality of institutions affects technological deepening in developing countries," Policy Research Working Paper Series 2603, The World Bank.
    17. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    18. Roberto Rigobon & Dani Rodrik, 2004. "Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships," NBER Working Papers 10750, National Bureau of Economic Research, Inc.
    19. Nelson, Richard R. & Sampat, Bhaven N., 2001. "Making sense of institutions as a factor shaping economic performance," Journal of Economic Behavior & Organization, Elsevier, vol. 44(1), pages 31-54, January.
    20. Brunetti, Aymo & Kisunko, Gregory & Weder, Beatrice, 1997. "Institutions in transition : reliability of rules and economic performance in former Socialist countries," Policy Research Working Paper Series 1809, The World Bank.
    21. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, April.
    22. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    23. Andre Gunder Frank, 1978. "Dependent Accumulation and Underdevelopment," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-16014-3, October.
    24. John J. Wallis & Douglass North, 1986. "Measuring the Transaction Sector in the American Economy, 1870-1970," NBER Chapters, in: Long-Term Factors in American Economic Growth, pages 95-162, National Bureau of Economic Research, Inc.
    25. Yifu Lin, Justin & Nugent, Jeffrey B., 1995. "Institutions and economic development," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 38, pages 2301-2370, Elsevier.
    26. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    27. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-368, June.
    28. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 652-662, June.
    29. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," NBER Working Papers 6849, National Bureau of Economic Research, Inc.
    30. Aron, Janine, 2000. "Growth and Institutions: A Review of the Evidence," The World Bank Research Observer, World Bank, vol. 15(1), pages 99-135, February.
    31. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, March.
    32. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    33. Isham, Jonathan & Kaufmann, Daniel & Pritchett, Lant H, 1997. "Civil Liberties, Democracy, and the Performance of Government Projects," The World Bank Economic Review, World Bank, vol. 11(2), pages 219-242, May.
    34. Adeel Malik, 2002. "State of the Art in Governance Indicators," Human Development Occasional Papers (1992-2007) HDOCPA-2002-07, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Javed, Omer, 2013. "Determinants of Institutional Quality: A Case Study of IMF Programme Countries," MPRA Paper 51344, University Library of Munich, Germany.
    2. Laura Heras Recuero & Roberto Pascual González, 2019. "Economic growth, institutional quality and financial development in middle-income countries," Working Papers 1937, Banco de España.
    3. Néstor Le Clech & Juan Carlos Guevara-Pérez, 2023. "Latin America and the Caribbean’s Productivity: The Role of Pro-Market Policies, Institutions, Infrastructure, and Natural Resource Endowments," Economies, MDPI, vol. 11(5), pages 1-21, May.
    4. Philip Franses & Rianne Legerstee, 2014. "Statistical institutes and economic prosperity," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(1), pages 507-520, January.
    5. William Orlando Prieto Bustos & Joan Miguel Tejedor Estupiñán, 2019. "Eficiencia Técnica de las Instituciones Públicas Locales en Colombia," Revista de Estudios Regionales, Universidades Públicas de Andalucía, vol. 2, pages 15-41.
    6. Javed, Omer, 2014. "Institutional quality, macroeconomic stabilization and economic growth: a case study of IMF programme countries," MPRA Paper 56370, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Siddiqui, Danish Ahmed & Ahmed, Qazi Masood, 2013. "The effect of institutions on economic growth: A global analysis based on GMM dynamic panel estimation," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 18-33.
    2. Rodríguez-Pose, Andrés & Ketterer, Tobias, 2016. "Institutions vs. ‘First-Nature’ Geography – What Drives Economic Growth in Europe’s Regions?," CEPR Discussion Papers 11322, C.E.P.R. Discussion Papers.
    3. Tobias D. Ketterer & Andrés Rodríguez‐Pose, 2018. "Institutions vs. ‘first‐nature’ geography: What drives economic growth in Europe's regions?," Papers in Regional Science, Wiley Blackwell, vol. 97(S1), pages 25-62, March.
    4. Mehmet Ugur & David Sunderland, 2011. "Does Economic Governance Matter? New Contributions to the Debate," Chapters, in: Mehmet Ugur & David Sunderland (ed.), Does Economic Governance Matter?, chapter 1, Edward Elgar Publishing.
    5. Arvanitidis, Paschalis & Petrakos, George & Pavleas, Sotiris, 2007. "Determinants of economic growth: the experts’ view," Papers DYNREG20, Economic and Social Research Institute (ESRI).
    6. Williamson, Claudia R., 2012. "Dignity and development," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(6), pages 763-771.
    7. Irina-Elena GENTIMIR, 2015. "In The Globalization Era, Which Are The Determinants Of Growth?," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 7(1), pages 60-79, March.
    8. Lubna Hasan, 2007. "Myths and Realities of Long-run Development: A Look at Deeper Determinants," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(1), pages 19-44.
    9. Sambit Bhattacharyya, 2011. "Growth Miracles and Growth Debacles," Books, Edward Elgar Publishing, number 13609.
    10. Ola Olsson, 2005. "Geography and institutions: Plausible and implausible linkages," Journal of Economics, Springer, vol. 10(1), pages 167-194, December.
    11. Mauricio Cárdenas, 2007. "Economic Growth in Colombia : a reversal of "fortune"?," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 25(53), pages 220-259, January.
    12. Yasir Khan & Attiya Yasmin Javid, 2015. "The Impact of Formal and Informal Institutions on Economic Performance: A Cross-Country Analysis," PIDE-Working Papers 2015:130, Pakistan Institute of Development Economics.
    13. Sambit Bhattacharyya & Steve Dowrick & Jane Golley, 2009. "Institutions and Trade: Competitors or Complements in Economic Development?," The Economic Record, The Economic Society of Australia, vol. 85(270), pages 318-330, September.
    14. Javed, Omer, 2013. "Determinants of Institutional Quality: A Case Study of IMF Programme Countries," MPRA Paper 51344, University Library of Munich, Germany.
    15. Andrea F. Presbitero, 2006. "Institutions and geography as sources of economic development," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(3), pages 351-378.
    16. Malik, Adeel & Temple, Jonathan R.W., 2009. "The geography of output volatility," Journal of Development Economics, Elsevier, vol. 90(2), pages 163-178, November.
    17. Eicher, Theo S. & García-Peñalosa, Cecilia & Kuenzel, David J., 2018. "Constitutional rules as determinants of social infrastructure," Journal of Macroeconomics, Elsevier, vol. 57(C), pages 182-209.
    18. Polimeni, John M. & Iorgulescu Polimeni, Raluca & Trees, W. Scott, 2007. "Extending The Augmented Solow Growth Model To Explain Transitional Economies," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 4(1), pages 65-76, March.
    19. Mina Baliamoune-Lutz, 2007. "Entrepreneurship, Reforms, and Development: Empirical Evidence," ICER Working Papers 38-2007, ICER - International Centre for Economic Research.
    20. Rabah Arezki & Frederick van der Ploeg, 2011. "Do Natural Resources Depress Income Per Capita?," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 504-521, August.

    More about this item

    Keywords

    Institutions; governance; growth; investment; technological change;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:25909. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.