Working Paper: NBER ID: w10568
Authors: Edward L. Glaeser; Rafael La Porta; Florencio Lopez-de-Silanes; Andrei Shleifer
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.
Keywords: Institutions; Economic Growth; Human Capital
JEL Codes: O11; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Human Capital (J24) | Economic Growth (O49) |
| Political Institutions (D02) | Economic Growth (O49) |
| Economic Growth (O49) | Political Institutions (D02) |
| Policies enacted by dictators (P26) | Economic Growth (O49) |
| Instrumental variable techniques (C36) | Flawed causal claims (D91) |