Growth and Institutions: A Review of the Evidence

Africa's disappointing economic performance, the East Asian financial crisis, and the weak record of the former Soviet Union have focused attention on the role of institutions in determining a economic growth. This article critically reviews the literature that tries to link quantitative measures of institutions, such as civil liberties and property rights, with growth of gross domestic product across countries and over time. An important distinction is made between indicators that measure the performance or quality of institutions and those that measure political and social characteristics and political instability. The evidence suggests a link between the quality of institutions and investment and growth, but the evidence is by no means robust.