Rule of law, democracy, openness, and income

Description

"We estimate the interrelationships among economic institutions, political institutions, openness, and income levels, using identification through heteroskedasticity (IH). We split our cross-national dataset into two sub-samples: (i) colonies versus non-colonies; and (ii) continents aligned on an East-West versus those aligned on a North-South axis. We exploit the difference in the structural variances in these two sub-samples to gain identification. We find that democracy and the rule of law are both good for economic performance, but the latter has a much stronger impact on incomes. Openness (trade/GDP) has a negative impact on income levels and democracy, but a positive effect on rule of law. Higher income produces greater openness and better institutions, but these effects are not very strong. Rule of law and democracy tend to be mutually reinforcing"--National Bureau of Economic Research web site.

Subjects

Series Statement

• NBER working paper series -- no. 10750.
• Working paper series (National Bureau of Economic Research) -- working paper no. 10750.

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Other Editions

• Rule of law, democracy, openness, and income: estimating the interrelationshipsNational Bureau of Economic Research2004-01-01
• Rule of law, democracy, openness, and incomeElectronic resourceNational Bureau of Economic Research2004-01-01