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Institutions and economic performance: what can be explained?

Commander, Simon and Nikoloski, Zlatko (2011) Institutions and economic performance: what can be explained? Review of Economics and Institutions, 2 (2). ISSN 2038-1344

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Identification Number: 10.5202/rei.v2i2.33


Institutions are now widely believed to be important in explaining performance. In this paper, we analyze whether commonly used measures of institutions have any significant, measurable impact on performance, whether of countries or firms. We look at three ‘levels’ of institutions and associated conjectures. The first concerns whether the political system affects performance. The second concerns whether the business and investment environment affects the performance of countries and the third concerns whether perceived business constraints directly affect the performance of firms. In all instances, we find little evidence of a robust link between widely used measures of institutions and our indicators of performance. We consider why this might be the case and argue that mis-measurement, mis-specification, complexity and non-linearity are all relevant factors.

Item Type: Article
Official URL:
Divisions: LSE Health
Subjects: H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development
P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy; Legal Institutions; Property Rights
Date Deposited: 12 Sep 2012 14:45
Last Modified: 17 Oct 2021 23:10

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