Growth Miracles and Growth Debacles
Show Less

Growth Miracles and Growth Debacles Exploring Root Causes

Exploring Root Causes

Sambit Bhattacharyya

In this fascinating book, Sambit Bhattacharyya presents a detailed account of the socio-economic processes that create broad variations in living standards across the globe.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 8: Which Institutions Matter Most for Economic Growth?

Sambit Bhattacharyya

Extract

8. Which institutions matter most for economic growth? 8.1 UNBUNDLING INSTITUTIONS Institutions are often defined as a collection of many attributes. The most commonly used measure of institutions in the institutions and development literature is the rule of law. The implicit assumption made in these studies is that better implementation of the rule of law is an indication of the overall quality of institutions. However, from the point of view of policy, it remains crucial to find out which type of institutions are important for growth and development. In this section, I make an attempt to unbundle institutions and estimate their impact on growth. I adopt Rodrik’s (2005) four-way classification (market creating, market regulating, market stabilizing and market legitimizing) of institutions and include them as explanatory variables of growth in my model. This is in contrast to other studies in the contemporary literature that focus on the importance of property rights and contracts in creating the right incentive structure for investment and entrepreneurship. But long-run economic growth requires more than just a boost in investment or entrepreneurship. To sustain growth momentum requires institutions that can facilitate exchange in a world of imperfect information, handle random shocks to the economy and facilitate socially acceptable burden sharing in the event of a shock. The four-way classification attempts to cover all aspects of institutions and also distinguish them on the basis of their functions. Market-creating institutions are those that protect property rights and ensure contract enforcement. They are called market creating since, in...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.


Further information

or login to access all content.