Institutions as the fundamental cause of long-run growth
By: Daron Acemoglu, Simon Johnson, James Robinson.
Contributors: Johnson, Simon, 1874-1970; Robinson, James.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10481; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10481.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Public institutions.; Economic development.; Korea (South) -- Economic conditions.; Korea (North) -- Economic conditions.
Description: "This paper develops the empirical and theoretical case that differences in economic institutions are the fundamental cause of differences in economic development.  We first document the empirical importance of institutions by focusing on two 'quasi-natural experiments' in history, the division of Korea into two parts with very different economic institutions and the colonization of much of the world by European powers starting in the fifteenth century.  We then develop the basic outline of a framework for thinking about why economic institutions differ across countries.  Economic institutions determine the incentives of and the constraints on economic actors, and shape economic outcomes.  As such, they are social decisions, chosen for their consequences.  Because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over these social choices, ultimately resolved in favor of groups with greater political power.  The distribution of political power in society is in turn determined by political institutions and the distribution of resources.  Political institutions allocate de jure political power, while groups with greater economic might typically possess greater de facto political power.  We therefore view the appropriate theoretical framework as a dynamic one with political institutions and the distribution of resources as the state variables.  These variables themselves change over time because prevailing economic institutions affect the distribution of resources, and because groups with de facto political power today strive to change political institutions in order to increase their de jure political power in the future.  Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad-based property rights enforcement, when they create effective constraints on power-holders, and when there are relatively few rents to be captured by power-holders.  We illustrate the assumptions, the workings and the implications of this framework using a number of historical examples"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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