Which Institutions Promote Growth? Revisiting the Evidence

Abstract

Recent research examining the growth impacts of institutions have found that institutions are important in fostering economic growth. By building a framework around the institutional taxonomy proposed by Rodrik (2005), our paper contributes to the literature in the following way. First, we confirm the result that "institutions matter" and show that different types of institutions matter differently for growth. By applying a dynamic panel model, we find that market-creating and market-stabilising institutions are important in fostering economic growth. We then extend this analysis and investigate whether countries at different levels of development could respond heterogeneously to changes in their institutional structure. We find that poor countries benefit the most from market-creating institutions and institutions that support market stability. We also find some evidence that market-legitimising institutions such as "democracy" are not necessarily optimal for growth in poor countries. These results have important implications for countries that decide on the optimal strategy to improve their institutional framework.

Institutions, Economic Growth and International Competitiveness: A Regional Study

“…Market-creating institutions enable economic agents within an economy to interact, transact, and produce goods and services in the knowledge that economic profits from such activities is within their control (North, 1992;Rodrik, 2005;Das & Quirk, 2016). They protect rights and enforce contracts; in their absence, markets either perform poorly or fail to exist.…”

“…The second category of market-regulating institutions comprise the structures and arrangements that impose rules on markets to sustain long-run economic growth, while constraining market failures (Rodrik, 2005;Das & Quirk, 2016). Examples include regulatory agencies dealing with employment, financial services, telecommunication and transportation.…”

Agglomeration of fast food companies in Brazil

“…Companies analyze indicators to assist the decision-making process of whether or not to invest in a particular business. In particular, companies analyze the relevance of what they call governance indicators, such as the quality of institutions (Kaufmann et al, 1999;Kaufmann et al, 2002;Kaufmann et al, 2009;Glaeser et al, 2004;Robles, 2015), as well as human capital (Das and Quirk, 2016;Robles, 2015) on economic growth. Kaufmann et al (1999Kaufmann et al ( , 2002 and Kaufmann et al (2009) mentioned six indicators as fundamental to the business development process, namely the voice of the population in terms of choice of the types of government, the degree of political stability and degree of violence, the effectiveness of services provided by the government, the quality of regulatory systems, the quality of the legal system and the degree of corruption in a given country.…”

“…This paper brings light to two untreated areas in the literature that are retail in fast-food chains in Brazil and the aspects that influence the agglomeration of these networks by techniques used in other research areas, such as industry. For the development of this study, a portion of the variables used in previous studies by Kaufmann et al (1999Kaufmann et al ( , 2002 and Fast food companies in Brazil Kaufmann et al (2009); Glaeser et al (2004); Robles (2015); and Das and Quirk (2016) was elected. In addition, a Brazilian indicator, "PAT" (Workers' Feeding Program), was added.…”

A Review of the Recent Literature on the Institutional Economics Analysis of the Long‐run Performance of Nations

“…Rodrik (2005) developed a four‐way classification of institutions: market creating, market regulating, market stabilizing and market legitimizing institutions. This classification has been used by Battacharyya () and Das and Quirk () to try to ascertain which institutions are more important in promoting growth. Both studies find that market creating and market stabilizing institutions are more important in promoting growth.…”