Unbundling institutions
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Author
Contributions
- Johnson, Simon - Contributor
- Massachusetts Institute of Technology. Dept. of Economics - Contributor
Publication
2003 - Massachusetts Institute of Technology, Dept. of Economics, Cambridge, MA, Massachusetts
Language
English
Word Count
9,750 words, Guess
Page Count
39 pages
Identifiers
- Internet Archiveunbundlinginstit00acem
- OCLC Control Number53181742
- Open LibraryOL24639934M
Description
This paper evaluates the importance of "property rights institutions," which protect citizens against expropriation by the government and powerful elites, and "contracting institutions," which enable private contracts between citizens. We exploit exogenous variation in both types of institutions driven by colonial history, and document strong first-stage relationships between property rights institutions and the determinants of European colonization strategy (settler mortality and population density before colonization), and between contracting institutions and the identity of the colonizing power. Using this instrumental variables approach, we find that property rights institutions have a first-order effect on long-run economic growth, investment, and financial development. Contracting institutions appear to matter only for the form of financial intermediation. A possible explanation for this pattern is that individuals often find ways of altering the terms of their formal and informal contracts to avoid the adverse effects of contracting institutions, but are unable to do so against the risk of expropriation. Keywords: Contracts, Economic Growth, Financial Development, Institutions, Law and Finance, Legal Formalism, Legal Origin, Political Economy, Politics, Property Rights. JEL Classification: E44, G18, K00, N20, P16, P17.
Subjects
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