Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships / Roberto Rigobon, Dani Rodrik.

Format:

Book

Author/Creator:

Rigobon, Roberto.

Contributor:

National Bureau of Economic Research.

Rodrik, Dani.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10750.

NBER working paper series no. w10750

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Rule of Law, Democracy, Openness, and Income

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

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.

Notes:

Print version record

September 2004.