Institutions as the Fundamental Cause of Long-Run Growth

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Institutions as the Fundamental Cause of Long-Run Growth (2005)

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by Daron Acemoglu , Simon Johnson , James Robinson

Venue:	IN HANDBOOK OF ECONOMIC GROWTH, ED. PHILIPPE AGHION AND STEPHEN DURLAUF
Citations:	454 - 8 self

BibTeX

@INPROCEEDINGS{Acemoglu05institutionsas,
    author = {Daron Acemoglu and Simon Johnson and James Robinson},
    title = {Institutions as the Fundamental Cause of Long-Run Growth},
    booktitle = {IN HANDBOOK OF ECONOMIC GROWTH, ED. PHILIPPE AGHION AND STEPHEN DURLAUF},
    year = {2005},
    pages = {385--472},
    publisher = {Elsevier}
}

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Abstract

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 aconflict 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

Keyphrases

fundamental cause economic institution long-run growth political institution different economic institution political power different group social decision social choice basic outline economic development european power empirical importance economic actor quasi-natural experiment fifteenth century economic outcome theoretical case

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