Institutions and Growth: Time Series Evidence from Natural Experiments

Working Papers from University of Washington, Department of Economics

Abstract: Documenting the long term impact of institutions on economic performance has generated tremendous interest in the development literature. Contemporary or intermediate term effects of institutions over time are difficult to establish, however, since institutions seldom change significantly in the short run. In addition, accepted instruments that control for endogeneity of institutions in cross sections are inappropriate for time series analysis. In this paper we utilize an eleven year panel of 26 countries with sufficient institutional variation to identify large and significant short and intermediate effects of institutions. To control for endogeneity, we utilize the hierarchy of institutions hypothesis and find that it holds strong explanatory power. A 10 percent change in institutional quality towards OECD standards is shown to raise annual growth by 3.5 percent. In discriminating between short run and intermediate term effects, we can also document that early reformers reap the greatest benefits, but that it is never too late to begin institutional reform. *We thank Sascha Becker, Christa Heinz, Stephan Klasen, Chris Papageorgiou, Charles Nelson, Richard Startz, Farid Toubal, Steve Turnovsky, and especially John Temple for helpful comments. Any remaining errors are our own. Theo Eicher thanks the German Science Foundation for financial support. … i

Date: 2010-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published in Journal of Development Economics , Volume 91 (2010) 169–179

Downloads: (external link)
http://faculty.washington.edu/~te/papers/es.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:udb:wpaper:uwec-2007-15-p

Access Statistics for this paper

More papers in Working Papers from University of Washington, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Michael Goldblatt ().