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Posts Tagged ‘Growth’

Capital and Institutions Stimulate Growth

December 3rd, 2010 humas 1 comment

“…the best single predictor of the growth of an economy remains its investment rate.”

“The four key issues for defining institutional quality are: the quality of the bureaucracy; rule of law; risk of expropriation; and repudiation of contracts by government.”

... for growth

What explains the stellar economic performance of the East Asian nations since World War ll? How critical a role did government interventions and industrial policy play? And perhaps most importantly, what policy insights can be gleaned from East Asia that might spur faster economic growth in the former East Bloc and developing nations of the world?

“Most economists would agree that there are major lessons to be drawn for other countries from East Asia’s growth experience,” begins a wide-ranging paper by NBER Research Associate Dani Rodrik. “But what these lessons are remains subject to considerable controversy.”

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No Evidence that Aid Stimulates Growth

November 11th, 2010 humas 1 comment

“… regardless of the situation — for example, in countries that have adopted sound economic policies or improved government institutions — or the type of assistance involved, aid does not appear to stimulate growth over the short or long term.”

Challenging the simplistic but seductive view that increased assistance from rich countries is likely to put many poor countries on the path to prosperity, a new study on the impact of foreign aid finds “little evidence” that it ever has a positive effect on economic growth.

In Aid and Growth: What Does the Cross-Country Evidence Really Show? (NBER Working Paper No. 11513), co-authors Raghuram Rajan and Arvind Subramanian conclude that regardless of the situation — for example, in countries that have adopted sound economic policies or improved government institutions — or the type of assistance involved, aid does not appear to stimulate growth over the short or long term.

They point out that their exhaustive analysis should not be taken as an argument that aid cannot ever help the growth of countries that receive it, only that there is “no discernible robust impact of aid on growth, positive or negative” in the past.

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Institutions as the Fundamental Cause of Long-Run Growth

April 21st, 2010 humas No comments

Daron Acemoglu, Simon Johnson, James A. Robinson develops the empirical and theoretical case that differences in economic institutions are the fundamental cause of differences in economic development.

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Do Institutions Cause Growth?

February 12th, 2010 humas 5 comments

Do Institutions Cause Growth?We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement.

We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed.

Basic OLS results, as well as a variety of additional evidence, suggest that:

  1. human capital is a more basic source of growth than are the institutions,
  2. poor countries get out of poverty through good policies, often pursued by dictators, and
  3. subsequently improve their political institutions.

Download:  Do Institutions Cause Growth?

Unbundled Institutions, Human Capital and Growth

May 5th, 2009 humas No comments

By Sambit Bhattarchayya
The Arndt-Corden Division of Economics, Research School of Pacific and Asian Studies, College of Asia and the Pacific, The Australian National University

Unbundled Institutions, Human Capital and GrowthWe investigate the partial effects of institutions and human capital on growth. We find that cross-country regressions of the log-level of per capita GDP on instrumented measures of institutions and schooling are uninformative about the relative importance of institutions and human capital in the long run because of multicollinearity problems.

Using dynamic panel regressions we show that both institutions and human capital have significant effects on growth. Using Rodrik’s (2005) four-way partition of institutions, we also unbundle institutions.

We show that strong market creating institutions and market stabilising institutions are growth enhancing. Market regulating institutions matter up to a certain extent and market legitimising institutions does not seem to matter.

Download: Unbundled Institutions, Human Capital and Growth