Working Paper: NBER ID: w17106
Authors: James A. Robinson; Ragnar Torvik
Abstract: Why was the Black Death followed by the decline of serfdom in Western Europe but its' intensification in Eastern Europe? What explains why involvement in Atlantic trade in the Early Modern period was positively correlated with economic growth in Britain but negatively correlated in Spain? Why did frontier expansion in the 19th Century Americas go along with economic growth in the United States and economic decline in Latin America? Why do natural resource booms seem to stimulate growth in some countries, but lead to a 'curse' in others, and why does foreign aid sometimes seem to encourage, other times impede economic growth? In this paper we argue that the response of economies to shocks or innovations in economic opportunities depends on the nature of institutions. When institutions are strong, new opportunities or windfalls can have positive effects. But when institutions are weak they can have negative effects. We present a simple model to illustrate how comparative statics are conditional on the nature of institutions and show how this perspective helps to unify a large number of historical episodes and empirical studies.
Keywords: No keywords provided
JEL Codes: D7; N50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strong institutions (D02) | positive growth outcomes (O40) |
| weak institutions (O17) | negative growth outcomes (I12) |
| natural resource booms (Q33) | negative growth outcomes (I12) |
| natural resource booms (Q33) | positive growth outcomes (O40) |
| frontier lands (Q15) | economic growth (O49) |
| frontier lands (Q15) | negative outcomes (I12) |