Abstract

Why are some countries rich and others poor? Part of the variation in economic development across countries can be explained by accumulation of human and physical capital and investments in innovation. However, substantial variation in economic development across countries remains after accounting for these factors. A growing body of literature emphasizes political institutions as the “deeper” determinants of economic development (e.g. Rodrik 2003, Helpman 2008). Political institutions encourage or discourage the rate of accumulation and innovation by influencing policy decision-making and by enabling (or not) politicians to credibly commit to policies.