Institutions, Inequality and Growth
A review of theory and evidence on the institutional determinants of growth and inequality
Publication date: 2011-02
Innocenti Working Papers
No. of pages: 66
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The diﬀerence in the development experiences between the most developed countries and the least developed countries of today is vast. Luxembourg’s per capita income is 200 times larger than Liberia’s. Even within the developing world, growth is very unequal. East Asia and parts of Latin America are growing at impressive rates, while many other countries - especially in Sub-Saharan Africa - struggle with sluggish and volatile growth. This study discusses the theoretical challenge posed in identifying the mechanisms that link institutions and equitable economic growth at various levels of aggregation. The relationship between governance modes and institutions on the one hand, and economic growth and development on the other hand, may take very different forms. This relates to the question of whether a single and unique combination of institutions and governance modes is optimal for (equitable) growth, or whether different governance modes and institutions may lead to good or equitable growth performance in different locations and historical contexts.