Year: 2004
Type: report
Abstract: We estimate the interrelationships among economic institutions, political institutions, openness, and income levels, using identification through heteroskedasticity (IH).We split our cross-national dataset into two sub-samples: (i) colonies versus non-colonies; and (ii) continents aligned on an East-West versus those aligned on a North-South axis.We exploit the difference in the structural variances in these two sub-samples to gain identification.We find that democracy and the rule of law are both good for economic performance, but the latter has a much stronger impact on incomes.Openness (trade/GDP) has a negative impact on income levels and democracy, but a positive effect on rule of law.Higher income produces greater openness and better institutions, but these effects are not very strong.Rule of law and democracy tend to be mutually reinforcing.
DOI: 10.3386/w10750
Authors: Roberto Rigobon, Dani Rodrik
Institutions: Massachusetts Institute of Technology, Harvard University
Language: English
Subfield: Demography
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3021827133