Skip to main content
Log in

Do Institutions Cause Growth?

  • Published:
Journal of Economic Growth Aims and scope Submit manuscript

Abstract

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

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Acemoglu, D., S. Johnson, and J. A. Robinson. (2001). “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review 91(5), 1369–1401.

    Google Scholar 

  • Acemoglu, D., S. Johnson, and J. A. Robinson. (2002). “Reversal of Fortune: Geography and Development in the Making of the Modern World Income Distribution,” Quarterly Journal of Economics 117(4), 1231–1294.

    Google Scholar 

  • Alesina, A., S. Ozler, N. Roubini, and P. Swagel. (1996). “Political Instability and Economic Growth,” Journal of Economic Growth 1(2), 189–212.

    Google Scholar 

  • Alvarez, M., J. A. Cheibub, F. Limongi, and A. Przeworski. (2000). Democracy and Development: Political Institutions and Material Well-Being in the World, 1950–1990. Cambridge: Cambridge University Press.

    Google Scholar 

  • Aten, B., A. Heston, and R. Summers. (2002). Penn World Tables Version 6.1. Center for International Comparisons at the University of Pennsylvania (CICUP).

  • Barro, R. J. (1991). “Economic Growth in a Cross-Section of Nations,” Quarterly Journal of Economics 106(2), 407–443.

    Google Scholar 

  • Barro, R. J. (1997). Determinants of Economic Growth. Cambridge, MA: MIT Press.

    Google Scholar 

  • Barro, R. J. (1999). “Determinants of Democracy,” Journal of Political Economy 107(6–2), 158–183.

    Google Scholar 

  • Barro, R. J., and J.-W. Lee. (2000). “International Data on Educational Attainment: Updates and Implications,” Working Paper 42, Center for International Development (February).

  • Beck, T., G. Clarke, A. Groff, P. Keefer, and P. Walsh. (2001). “New Tools in Comparative Political Economy: The Database of Political Institutions,” World Bank Economic Review 15(1), 165–176.

    Google Scholar 

  • Center for International Development, Geography Data sets. Found online at: http://www2.cid.harvard.edu/ciddata/geographydata.htm#General%20measures%20of%20geography>.

  • DeLong, J. B., and A. Shleifer. (1993). “Princes and Merchants: City Growth before the Industrial Revolution,” Journal of Law and Economics 36(2), 671–702.

    Google Scholar 

  • Diamond, J. (1997). Guns, Germs, and Steel. New York: Norton.

    Google Scholar 

  • Djankov, S., R., La Porta, F. Lopez-de-Silanes, and A. Shleifer. (2003). “The New Comparative Economics,” Journal of Comparative Economics 31(4), 595–619.

    Google Scholar 

  • Dollar, D., and A. Kraay. (2003). “Institutions, Trade and Growth,” Journal of Monetary Economics 50(1), 133–162.

    Google Scholar 

  • Easterly, W., and R. Levine. (2003). “Tropics, Germs, and Crops: How Endowments Influence Economic Development,” Journal of Monetary Economics 50(1), 3–39.

    Google Scholar 

  • Engerman, S., and K. Sokoloff. (1991). “Factor Endowments, Institutions, and Differential Paths of Growth among New World Economies,” in Stephen Haber (ed.), How Latin America Fell Behind. Stanford, CA: Stanford University Press.

    Google Scholar 

  • Gallup, J. L., and J. D. Sachs. (2001). “The Economic Burden of Malaria,” The American Journal of Tropical Medicine and Hygiene 64(1–2) (Suppl.), 85–96.

    Google Scholar 

  • Hall, R. E., and C. I. Jones. (1999). “Why Do Some Countries Produce So Much More Output per Worker Than Others?” Quarterly Journal of Economics 114(1), 83–116.

    Google Scholar 

  • International Country Risk Guide. (1996). Political Risk Services, East Syracuse, NY.

  • Jaggers, K., and M. G. Marshall. (2000). “Polity IV Project,” Center for International Development and Conflict Management, University of Maryland.

  • Jones, B., and B. Olken. (2003). “Do Leaders Matter? National Leadership and Growth since World War II,” Monograph, Harvard University.

  • Kaufmann, D., A. Kraay, and M. Mastruzzi. (2003). “Governance Matters III: Updated Governance Indicators for 1996–02,” Working Paper Draft for comments, World Bank Washington, D.C.

    Google Scholar 

  • Kaufmann, D., A. Kraay, and P. Zóido-Lobatón. (2002). “Governance Matters II: Updated Governance Indicators for 2000–01,” Working Paper No. 2772, World Bank Policy Research Department (February).

  • Kiszewski, A., A. Mellinger, P. Malaney, A. Spielman, S. Ehrlich, and J. D. Sachs. (2004). “A Global Index of the Stability of Malaria Transmission Based on the Intrinsic Properties of Anopheline Mosquito Vectors,” American Journal of Tropical Medicine and Hygiene (forthcoming).

  • Knack, S., and P. Keefer. (1995). “Institutions and Economic Performance: Cross-Country Tests Using Alternative Measures,” Economics and Politics 7(3), 207–227.

    Google Scholar 

  • La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny. (1997). “Legal Determinants of External Finance,” Journal of Finance 52(3), 1131–1150.

    Google Scholar 

  • La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny. (1998). “Law and Finance,” Journal of Political Economy 106(6), 1113–1155.

    Google Scholar 

  • La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny. (1999). “The Quality of Government,” Journal of Law, Economics, and Organization 15(1), 222–279.

    Google Scholar 

  • La Porta, R., F. Lopez-de-Silanes, C. Pop-Eleches, and A. Shleifer. (2004). “Judicial Checks and Balances,” Journal of Political Economy 112(2), 445–470.

    Google Scholar 

  • Lindert, P. H. (2001). “Democracy, Decentralization, and Mass Schooling before 1914,” Working Paper 104, University of California Agricultural History Center (February), San Diego, CA.

    Google Scholar 

  • Lipset, S. M. (1960). Political Man: The Social Basis of Modern Politics. New York: Doubleday.

    Google Scholar 

  • Lucas, R. E. (1988). “On the Mechanics of Economic Development,” Journal of Monetary Economics 22(1), 3–42.

    Google Scholar 

  • Maddison, A. (2003). The World Economy: Historical Statistics. Paris: OECD.

    Google Scholar 

  • Mauro, P. (1995). “Corruption and Growth,” Quarterly Journal of Economics 110, 681–712.

    Google Scholar 

  • McEvedy, C., and R. Jones. (1978). Atlas of World Population History. Viking Press.

  • Montesquieu, Charles de Secondat. (1748). The Spirit of the Laws. Paris.

  • Mulligan, C., R. Gil, and X. Sala-i-Martin. (2004). “Do Democracies Have Different Public Policies than Nondemocracies?” Journal of Economic Perspectives 18(1), 51–74.

    Google Scholar 

  • North, D. C. (1981). Structure and Change in Economic History. New York: Norton and Co.

    Google Scholar 

  • North, D. C. (1990). Institutions, Institutional Change, and Economic Performance. Cambridge: Cambridge University Press.

    Google Scholar 

  • North, D. C., and R. P. Thomas. (1973). The Rise of the Western World: A New Economic History. Cambridge: Cambridge University Press.

    Google Scholar 

  • Persson, T., and G. Tabellini. (2003). The Economic Effects of Constitutions. Cambridge, MA: MIT Press.

    Google Scholar 

  • Pritchett, L. (2000). “Where Has All the Education Gone?” World Bank Economic Review 15(3).

  • Przeworski, A. (2004a). “The Last Instance: Are Institutions the Primary Cause of Economic Development?” Mimeo, New York University.

  • Przerworski, A. (2004b). “Georgraphy vs. Institutions Revisited: Were Fortunes Reversed?” Mimeo, New York University.

  • Rodrik, D., A. Subramanian, and F. Trebbi. (2004). “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development,” Journal of Economic Growth 9, 131–165.

    Google Scholar 

  • Smith, A. (1976 [1776]). An Inquiry into the Nature and Causes of the Wealth of Nations (edited by Edwin Canaan). Chicago, IL: University of Chicago Press.

    Google Scholar 

  • World Health Organization. (1997). “World Malaria Situation in 1994, Part I,” WHO Weekly Epidemiological Record 36, 269–274

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Rights and permissions

Reprints and permissions

About this article

Cite this article

Glaeser, E.L., La Porta, R., Lopez-de-Silanes, F. et al. Do Institutions Cause Growth?. Journal of Economic Growth 9, 271–303 (2004). https://doi.org/10.1023/B:JOEG.0000038933.16398.ed

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/B:JOEG.0000038933.16398.ed

Navigation