Contracting institutions and development

Alex William Trew

    Research output: Contribution to journalArticlepeer-review

    Abstract

    The quality of contracting institutions has been thought to be of second-order importance next to the impact that good property rights institutions can have on long- run growth. Using a large range of proxies for each type of institution, we find a robust $negative$ link between the quality of contracting institutions and long-run growth when we condition on property rights and a number of additional macroeconomic variables. Although the result remains something of a puzzle, we present evidence which suggests that only when property rights institutions are good do contracting institutions appear also to be good for development. Good contracting institutions can reduce long-run growth when property rights are not secured, presumably because the gains from the (costly) contracting institutions cannot be realised. This suggests that contracting institutions can benefit growth, and that the sequence of institutional change can matter.
    Original languageEnglish
    Article number3
    JournalReview of Economics and Institutions
    Volume3
    Issue number3
    DOIs
    Publication statusPublished - 2012

    Keywords

    • Economic development
    • Institutions

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