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Abstract
Economic growth is a complex process involving many dimensions, causal
forces and transmission mechanisms. In order to avoid spurious correlations
and serious specification errors, it is necessary to place any empirical analysis
of growth in a general equilibrium model framework. The institutional framework
is just one of many potential causal forces, and institutions may, themselves,
be shaped by economic growth. This paper reviews papers published in
the mainstream economics journals over the last ten years which have estimated
regression equations to explain differences in long-term rates of economic
growth across countries. The review focuses on the role of institutions in
growth, and it comments on methodological strengths and weaknesses of these
types of empirical studies for better understanding the growth process.
The scope of the study is narrowed in three main ways. First, reviewed
studies apply to the whole economy. However, the implications could easily be
applied to individual sectors or commodities. Second, the studies consider
longer-term average growth rates. This enables cyclical and seasonal influences
to be ignored. Third, most of the reviewed studies have drawn on the
well recognized data banks reported by Summers and Heston (1984, 1988,
1991) which have a high degree of comparability from country to country and
over time.