Business Intelligence

Unbundled Institutions, Human Capital And Growth

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Executive Summary

The authors investigate the partial effects of institutions and human capital on growth. They find that cross-country regressions of the log-level of per capita GDP on instrumented measures of institutions and schooling are uninformative about the relative importance of institutions and human capital in the long run because of multicollinearity problems. Using dynamic panel regressions, they show that both institutions and human capital have significant effects on growth. Using Rodrik's (2005) four-way partition of institutions, they also unbundle institutions. They show that strong market creating institutions and market stabilizing institutions are growth enhancing. Market regulating institutions matter up to a certain extent and market legitimising institutions does not seem to matter.

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