IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/93561.html
   My bibliography  Save this paper

Path Break versus Path Drift: A Comparative Approach to Explain Variations in Institutional Effects on Economic Growth

Author

Listed:
  • Tamilina, Larysa
  • Tamilina, Natalya

Abstract

This study introduces a comprehensive model of institutional grafting wherein cultural, structural, and political forces shape new legal institutions. The model is used to argue that a country’s growth rates are a function of the distance that the new legal institutions develop to these three forces. We further argue that the distance’s size varies depending on the mode of institutional change: drift phase or path break. We demonstrate that the distance is usually large during a path break but tends to be significantly smaller for institutions emerging in the drift phase. As such, the new legal institutions strongly impact economic growth in the drift phase and only modestly influence growth rates during institutional path change. In the latter case, the political dimension’s quality determines the success of both a country’s growth trajectories and institutional reforms. These propositions are tested empirically based on a sample of 106 countries derived from the POLITY IV Project’s website.

Suggested Citation

  • Tamilina, Larysa & Tamilina, Natalya, 2018. "Path Break versus Path Drift: A Comparative Approach to Explain Variations in Institutional Effects on Economic Growth," MPRA Paper 93561, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93561
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/93561/1/MPRA_paper_93561.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter J. Boettke & Christopher J. Coyne & Peter T. Leeson, 2015. "Institutional stickiness and the New Development Economics," Chapters, in: Laura E. Grube & Virgil Henry Storr (ed.), Culture and Economic Action, chapter 6, pages 123-146, Edward Elgar Publishing.
    2. Ms. Ratna Sahay & Mr. Jeromin Zettelmeyer & Mr. Eduardo Borensztein & Mr. Andrew Berg, 1999. "The Evolution of Output in Transition Economies: Explaining the Differences," IMF Working Papers 1999/073, International Monetary Fund.
    3. Yuriy Gorodnichenko & Gerard Roland, 2017. "Culture, Institutions, and the Wealth of Nations," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 402-416, July.
    4. Lee, Keun & Kim, Byung-Yeon, 2009. "Both Institutions and Policies Matter but Differently for Different Income Groups of Countries: Determinants of Long-Run Economic Growth Revisited," World Development, Elsevier, vol. 37(3), pages 533-549, March.
    5. 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.
    6. Alejandro Portes, 2006. "Institutions and Development: A Conceptual Reanalysis," Population and Development Review, The Population Council, Inc., vol. 32(2), pages 233-262, June.
    7. Jean‐Philippe Platteau, 1996. "The Evolutionary Theory of Land Rights as Applied to Sub‐Saharan Africa: A Critical Assessment," Development and Change, International Institute of Social Studies, vol. 27(1), pages 29-86, January.
    8. 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.
    9. S. Fisher & R. Sahay & C. A. Vegh, 1997. "Stabilization and Growth in Transition Economies: The Early Experience," Voprosy Ekonomiki, NP Voprosy Ekonomiki, vol. 5.
    10. 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.
    11. Jong-A-Pin, Richard, 2009. "On the measurement of political instability and its impact on economic growth," European Journal of Political Economy, Elsevier, vol. 25(1), pages 15-29, March.
    12. Mr. Stanley Fischer & Mr. Carlos A. Végh Gramont & Ms. Ratna Sahay, 1996. "Stabilization and Growth in Transition Economies: The Early Experience," IMF Working Papers 1996/031, International Monetary Fund.
    13. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    14. Theo S. Eicher & Andreas Leukert, 2009. "Institutions and Economic Performance: Endogeneity and Parameter Heterogeneity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 197-219, February.
    15. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
    16. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    17. Eggertsson, Thrainn, 1997. "The old theory of economic policy and the new institutionalism," World Development, Elsevier, vol. 25(8), pages 1187-1203, August.
    18. Davis, Lewis S., 2010. "Institutional flexibility and economic growth," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 306-320, September.
    Full references (including those not matched with items on IDEAS)

    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. Tamilina, Larysa & Tamilina, Natalya, 2015. "The Impact of Variations in Institutional Grafting Modes on Economic Growth: A Three-Dimensional Approach," MPRA Paper 68648, University Library of Munich, Germany, revised 16 Apr 2015.
    2. Tamilina, Larysa & Tamilina, Natalya, 2016. "Post-Communist Transition as a Path Break: Comparing Legal Institutional Effects on Economic Growth between Path-Breaking and Path-Drifting Institutional Reforms," MPRA Paper 75430, University Library of Munich, Germany.
    3. Larysa Tamilina & Natalya Tamilina, 2017. "Post-communist Transition as a Path Break: Comparing Legal Institutional Effects on Economic Growth between Path-breaking and Path-drifting Institutional Reforms," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 11(3), pages 315-347, August.
    4. Tamilina, Larysa & Tamilina, Natalya, 2014. "Heterogeneity in Institutional Effects on Economic Growth: Theory and Empirical Evidence," MPRA Paper 63170, University Library of Munich, Germany.
    5. Larysa Tamilina & Natalya Tamilina, 2014. "Heterogeneity in Institutional Effects on Economic Growth: Theory and Empirical Evidence," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 11(2), pages 205-249, December.
    6. Larysa Tamilina & Natalya Tamilina, 2021. "Path-Break Versus Path-Drift: A Comparative Approach to Explain Variations in Institutional Effects on Economic Growth," The American Economist, Sage Publications, vol. 66(2), pages 281-300, October.
    7. Tamilina, Larysa & Tamilina, Natalya, 2012. "When formal institutions fail in fostering economic growth: the case of post-communist countries," MPRA Paper 48352, University Library of Munich, Germany, revised 01 Nov 2012.
    8. Tamilina, Larysa & Tamilina, Natalya, 2014. "Institutional Grafting as a Three-Dimensional Phenomenon," MPRA Paper 63171, University Library of Munich, Germany.
    9. Eicher, Theo S. & Schreiber, Till, 2010. "Structural policies and growth: Time series evidence from a natural experiment," Journal of Development Economics, Elsevier, vol. 91(1), pages 169-179, January.
    10. Silberberger, Magdalene & Königer, Jens, 2016. "Regulation, trade and economic growth," Economic Systems, Elsevier, vol. 40(2), pages 308-322.
    11. Saima Nawaz & M. Idrees Khawaja, 2016. "Fiscal Policy, Institutions And Growth: New Insights," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1251-1278, December.
    12. Glawe, Linda & Wagner, Helmut, 2022. "Is schooling the same as learning? – The impact of the learning-adjusted years of schooling on growth in a dynamic panel data framework," World Development, Elsevier, vol. 151(C).
    13. Theo Eicher & Till Schreiber, 2010. "Institutions and Growth: Time Series Evidence from Natural Experiments," Working Papers UWEC-2007-15-P, University of Washington, Department of Economics.
    14. Falcetti, Elisabetta & Lysenko, Tatiana & Sanfey, Peter, 2006. "Reforms and growth in transition: Re-examining the evidence," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 421-445, September.
    15. 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.
    16. David Aristei & Cristiano Perugini, 2014. "Speed and Sequencing of Transition Reforms and Income Inequality: A Panel Data Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 542-570, September.
    17. Ruiz Pozuelo, Julia & Slipowitz, Amy & Vuletin, Guillermo, 2016. "Democracy Does Not Cause Growth: The Importance of Endogeneity Arguments," IDB Publications (Working Papers) 7758, Inter-American Development Bank.
    18. Priebe, Jan & Rudolf, Robert, 2015. "Does the Chinese Diaspora Speed Up Growth in Host Countries?," World Development, Elsevier, vol. 76(C), pages 249-262.
    19. Mohammad Sharif Karimi & Elham Heshmati Daiari, 2018. "Does Institutions Matter for Economic Development? Evidence for ASEAN Selected Countries," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 22(1), pages 1-20, Winter.
    20. Serhan Cevik & Mohammad Rahmati, 2015. "Breaking the Curse of Sisyphus: An Empirical Analysis of Post-Conflict Economic Transitions," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 57(4), pages 569-597, December.

    More about this item

    Keywords

    Institutional economics; formal institutions; institutional change; institutional grafting;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:93561. 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.