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Institutions and Caribbean Economic Performance: Insights from Jamaica

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Abstract

We explore the impact of social institutions on economic performance in Jamaica through a reinterpretation of the plantation economic model. In its original form, the plantation model fails to develop a causal link between the plantation legacy and persistent underdevelopment. Despite its marginalization, the model remains useful for discussions on growth and development. Consequently, we offer a reappraisal using the causal insights from Kenneth Sokoloff and Stanley Engerman. We use two examples to demonstrate how inequality encourages the formation of institutions that are inconsistent with growth, and an empirical analysis to confirm the hypothesized relationship between inequality, institutions, and economic development. Since inequality is expected to influence growth indirectly, we use a structural specification, which follows William Easterly’s recent test of Sokoloff and Engerman’s argument. Our reliance on a time-series specification is unique. We demonstrate that the expectation that, on average, inequality and growth is negatively related and that institutions may compromise growth are accurate for Jamaica, the most cited Caribbean nation in the current discourse. Our results carry several policy implications, including support for the recent calls in Jamaica for political restructuring. However, both the paucity of similar studies and the importance of the implications for sustainable growth and development demand further analyses.

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Notes

  1. See Girvan (2006) for a review of criticisms of the model and responses to these.

  2. It has always been the case that small farmers also produce for export despite the severe conditions they face. Margaret Newman and Elsie LeFranc (1994) report that in 1978–1979, of all farms engaged in export production for the four key crops, 98% were farms under 25acres or 61ha.

  3. The WIDER data use various measures of income to compute the GINI, which will introduce some error into the analysis. The income measures are income, earnings, and consumption. For the definitions of the terms consult, the WIDER online data set.

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Acknowledgement

We appreciate the comments from two anonymous reviewers of SCID. In particular, we appreciate the very thoughtful and insightful comments from one of the two reviewers since they helped to establish an appropriate direction for the article. The comments and suggestions offered by Peter W. Elliott also served to improve the quality of the article, so we express our gratitude. We also thank Michael Witter for his comments on an earlier draft. Any errors remain the responsibility of the authors.

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Authors and Affiliations

  1. Department of Economics, Texas Christian University, Box 298510, Ft. Worth, TX, 76129, USA

    Dawn Richards Elliott

  2. Department of Economics, Howard University, 2400 Sixth Street, NW, Washington, DC, 20059, USA

    Ransford W. Palmer

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  1. Dawn Richards Elliott
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  2. Ransford W. Palmer
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Correspondence to Dawn Richards Elliott.

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Elliott, D.R., Palmer, R.W. Institutions and Caribbean Economic Performance: Insights from Jamaica. St Comp Int Dev 43, 181–205 (2008). https://doi.org/10.1007/s12116-008-9017-9

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