SYMPOSIUM: TRAILBLAZERS TOO LIGHTLY MENTIONED? The Empirical Institutions-Growth Literature: Is Something Amiss at the Top?
The past two decades have witnessed a resurgence of economic research on the most fundamental question: What causes economic growth? The research has suggested numerous determinants such as geography, physical capital, human capital, technology, population growth, and international trade. 1 More recently, however, empirical growth research has focused on “institutions.” For example, the theme of the World Bank’s 2002 World Development Report was “Building Institutions for Markets.” Although growth theory’s focus on institutions is a more recent phenomenon, economists’ acknowledgment of institutions is nothing new. In 1776, Adam Smith proclaimed that the path to economic prosperity begins with a general presumption of freedom from government intervention, and, ever since, classical liberal economists have continued the tradition (e.g., Hayek 1954, Friedman and Friedman 1980). Finally, beginning with the work of Douglas North, the link between institutions and economic performance gradually worked its way into the more academic discussions of growth theory (e.g., North and Thomas 1973, North 1990). One obvious reason for the long-standing lack of attention on institutions in the empirical growth literature is the inherent difficulty in measuring institutions. Although measures of some aspects of institutions have existed for some time, such as the Freedom House indexes of political and civil freedom, measures of a more comprehensive view of institutions and especially economic