Two Views on Institutions and Development: The Grand Transition vs the Primacy of Institutions

Publikation: Working paperForskning

  • Erich Gundlach, Kiel Institute for World Economy, Tyskland
  • Martin Paldam
  • Institut for Økonomi
The Grand Transition (GT) view claims that economic development is causal to institutional
development, and that many institutional changes can be understood as tran¬sitions occurring
at roughly the same level (zones) of development. The Primacy of Insti¬tu¬tions (PoI) view
claims that economic develop¬ment is a consequence of an exogenous selection of institutions.
Our survey of the empirical evidence and our own estimates reveal that it is easy to find con-
vincing evidence supporting either of the two views. Property rights do affect development as
suggested by the PoI. However, democracy is mainly an effect of develop¬ment as suggested by
the GT. We conclude that the empirical results are far too mixed to allow for a robust assess-
ment that one of the two views is true and the other false. This finding implies that focusing
on institutional development is unlikely to be successful as the key strategy for the economic
development of poor countries.
UdgiverInstitut for Økonomi, Aarhus Universitet
Antal sider38
StatusUdgivet - 2007

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