The Institutional Framework and Economic Development

The compound growth rates per capita output and Farrell-type efficiency measures for 115 market economies over the period 1960-80 were compared with measures of political, civil, and economic li berty. It was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies. Pol itically open societies, which subscribe to the rule of law, to priva te property, and to the market allocation of resources, grow at three times the rate and are two and one-half times as efficient as societ ies in which these freedoms are abridged. Copyright 1988 by University of Chicago Press.