Fconomlc Growth TbdolEd

Developmcnt of Stnt€tes to Achleve Sustrhrble 

Fconomlc Growth 

TbdolEd 

w 

DA}USI {IMID SIDDQi,I 

ft. 6. sf,d ofnrD d.sE 

D.?al!d dB6.d.+ ldrltof Altr 

t.d!6&ofr'r|Ai 

Xn ld,Erde 

&ril2010

Development of Strategies to Achieve Sustainrble 

Economic Growth 

DANISH AHMED SIDDIQUI 

Subnifted lo Uni6ily of (,E hi 

in runllrcnr oflhe EquiFm.nt3 for tbc dqrcc of 

DOCTOR oF PHILOSOPHY in Economid 

AFI20l0 

R.sarch Su!.dis 

Dr. oei M&.d Alncd 

!@iatc Piof@r & DiEcro. C@t! for BuiB & E@mic Rsb 

IBtituc ofBNi|4 Adnintuhrio4 K.ehi 

H 

D.p.rtn@r of Eolmicr F&ulty of Ari!, 

Uniqity of l

2010

ln ahc Nane of AILAH. fhe Me tun,flp Me MeftlN

DECLARATION 

I Danilh Ahm.d Siddiqui to }!ot rt Piud' Qdim Rs! Siddiqui h'Ebv doclarc mr no 

plir ol th. *o* pE$ntld bv n for lhis $ctis 'ntitLd "D'w'"'tunt oI Sta@'es 10 

lchlg S4toidbh Ewkic ed*''' b'ing ebmincd lo UniwBitv of Ka@hi' hs bdn 

tlosiaiz.d frod dtryh.Er' hoFr Fl*nc's iF oncn *ncdcr n@serv 

i -o*o* - t* -".o"" *d's fi' nsl'r b @@l dE &8t'! ir t'v o' rh' abow 

dcldtion !rw.! l.l* b.foE or.4n |i'r rh' N'd of {"gR 

| tudhd d@le $!r Inis eo *s qFi'd out dtiElv bv @ dd tntr il hts 'r''l' cfier 

wholry d in Fdr! bdn $trn @d ad rnv othsd'8r6 

Ddish ahrEd siddiqli 

c di(hE ld dF dGs/F oa Pn.D 

D.t rft of Eclfunics 

Uni6ity of Kdti, Krtelli 

r rhk $d dtd d@rd I hlr d.rR or 

i ii. ir".'i-r-l ;*re ep", 

;. **d;l-,"i 

"i.i..,,-,"':

CERTIFICATE 

I Le s@ rtmdf th. $6i. ritLd "D.d4p@r! otgrd2Sitt to tutAE Sabinatk 

E@Mic edlf st,tr,io,,Jbvnlt.D.ni$ Ano'd Siddiqu fd d' "rtt orhD &88 

rnd qrify ln.t io d* b6t oanv bwLrlg. h dn iB m ptlgitiz'd iddi.t 

z----.tJ 

asirte P;tus & Di@ior c€nltE fd Buii*$ & Edomic R.l&h 

rncitu& of Bsifts Adhinisr€iod, xtuhi

Certifi cate of APprorral 

This is ro erlit th.t Mr' Ddish Ann d Siddiqui hrs 

c@PlcLd his disrtd6 

'su@stullv 

in E6mic. titLd'D.E/qPted otsnabai.t to lchiN Sshi4bk E Mic Awh " 

'D. rlgd! ie foon..c.4L eln.t4o*d for$thDi$io in nnfiltEnl oflh' 

@uilffir of tle D.gd orDodo. of Fnih.ooht 

'' dE D'F tna of &moicr 

Reffh SuD.Fis, 

i-.r"i. niG ! or"* c""h rd BBi6 & E(Mn R.36h 

In*itlne ot B6ln $ alianisrndo, K@hr

Abstract 

r h. rh6n dpns MI\' ch3ptd wift rh' dmn rhm' ofiNtution'i ersl'tv md susuidbr' 

*;, ;;" 

".;"*;.",dptsh!6,h.Ecd'iB']nio\binsdinimr 

l*,"'l' '*"' *'"'- '" " "*nsr; mv b q*ridtr'h ndu( rduio*r q@trv 

'fr:l#J;;.;*, *"-*-'*:'*,1:-liiffi1*";"1^ 

nmelv nsk rcducing r6hnolo3iB {d ori ftd s"liig tshobg6 

;;i;;;.;;:*-'*'**hdon'inobidriv'nendbolaronPrinciparosporen'I 

l"'",;;;;",;.;i'**'.'* ^:::1":' ]1il;' i:ffi il:l.l" "" 

ndmof i0iituri0n'l qualir' of5 v'u 

l;. ; ;..:;;"";;.*"*rem' 

::,';;"**"*''''rlorP!.nEnerJ$utr 

roveringihc pdnodo':uur 

juJ,''.,h a b6'd m 

"m?'md'\ctrs'dr 

Ih*inrrdos'ndi6"erhd 

lI,T.'';;;;;"-,";d"d@dsm.mer,ic'i'ch"iq"6 ^'|'Iid'b'sicm"er 

*,,""' !En dBms.d5dor'Fr'ol':":""11._ 

:;.;,-.".".", 

'5o*-*.*'-'*'"" ' "n rh' bGtr BF{h n.d'r adinn€d b ri' de\eropine @m'6 

sn@r inda oIi.'iird'on\' 

;;;;;" *''"'" 

"krop'*roln.nBbins'tus 

;*;;;";;;''*"'"-'o@nmicp'do.*nd'dsins'icsd6&b 

"*i.l*i-*""" 

^-* * * t*- 

* 6insd tr'ttdorost/ rn d*a-!er".l isoridffi G 

!nn! $d loh.ts4l@li6 oitrr'ctdion !:tiDhr !'d dt 

" '**" 

::T.:T':.":"*-",.""orindndionsposniltrv 

;;;;;;; ;; .' dl'r &'!ins i..dim @ wav or 

"* 

'*'dids 

"tdiv' 

,*','t"" r-* U- t* irdtirtiion' Ritr iid do d 5@ b prods I 

-t'" 'ldEiru 'Irs 

;;:;;;;;;'" 

J-mrvdvitr'mn'l rh'*id"*ord*E@isareded 

.1- * toDfli bll is 

-.*"'*' -*-** 

sn ddfional upon lhe q0alitv ot plsrdr 

,*,"U"* "* n o *"t* 

" "'-"- rhaq whetr il(nuids sroMh dFMi6 r6@d for Pd(nia n* 

;;;;;;";';",*'"''.,*-noFrhdd irc $krngisriruriotrs rnrac!rheihpmrordti 

;;; ,* -."' * . parmns" of P{is@ ,*s ro Mrin idgni6@L rne ftss 

-* 

rd 

impa'1i'c@Dmic gmM' rth,,e 

i" **'i* * t*'"* -o **th rn P i$rs d @ii@sntd rhu *hibir areriabre rong 

'nd 

- -*a*" *" (j*"- t*tlilv Gr liidings i'diodc lh! incrc is cler uni diredion€l long 

,J" --" 

**- 

gD*l! in *hioh idirdiomr quar'e @ @ndic sp*h 

'*'iti'" 

- 

Houwei m .videm. ss lound for shd nn €ulrlirv in $v didion

( t,, t' t (, /,.!/ &l - F< a.t,, t. - 1 {-F ! L If v I G v,Fct t r r'J.t v. 

( ;-/a, : L J iJ gly,bt JP lev 6 )'/L r).u & Lt, tlt -1- ljv jP"r,r"' 

Q.,{ J g,1,t o (, p,3 r,, ut &t L -( v- ez - 4 $ - a } i rf{n +'{,! j7 

e;.-, h "t Cttt-Qti, J,L.,U J_tL jl.t.,e(6.'tr* Jlv Jy,u.tv"-- 

, i -' 4Et - + )z,l'4', I " 

ct n rv 6, t -.tu - r-.:.' e t t4 - 7 v,lefu a'e t 

- 7 c.t 

a s. 2- L i g e /,!,'. j,,,' d5 t vQ & 

g 

L g'b DV. d ;? {t l2' i L 

tr< -7 g' : r! L e-tu',)\t r/. +,f1, ) t't z.,v t tt " -+ vft y,'!, r' it,',' 

& J tl6,t?,L r'/U,eI Jt,,'tp|"ac,l,/g,!,t7. g'',t",1st6,I 'g'! 27 f vr,ct 

)v 6t !tt) irt't &. uz L ;6'r;. L Ar'e. { 7{67 z, :L 4 it,e 3:v,!' 

,J | -{r4 ^r, tL,F\h 4, i.F

Acknowledgments 

All .he lhants lnd Dois lo Atdi€ll|, Allah cMbling ne dd eiting 

'or 

lnoqldsc dd 

iders !o implcm.nl, and pDviding me st'Ensth 5'd mufse ro c'rv on lnd eohplish lhh 

Es@h- And @ntl6s elulition upon I lis I tol, Pbphct Muhmmd (pe@ b' upon him)' 

wh@ le{ninls bts.d o jusie tnl qlulnt hlvc l'd h' 1o un|.tute NlFh on lhis 

sbjcl. I tl$ lhdt( mv pamb fof .Mumgins re ud siYins ne all th' supp'rr and 

bactitrc i. th. D.nod of mv sndies, wilhour *hich I sinplv @ld 'ot $ink ol udctuking 

$is r4k. | !o.l$ indebl€d lo mv ftnilv for b'aring *ith ne io dimcux tin's' 

I wish io thank my 3rp€Fisot, Dr. QMi M|sod Ahne4 for hh valubL and crpcn 

guid,e, isiehlful @mmll ed en@mgeft ddne lhe ous otlhis sludv th lElp'd 

slEp. lhc didid $d f6us of nv llgdh H' h6 frelv giH his treio6 tim' dd mode 

ru f*l $.r my wlt h6 alw!}s ten his Fiditt- I lle Mi Mohsin llm0i' 

'hDwledg€ 

Anna4 Econdilr, ADplidd E@n@ics R.srch €nlE (aERC) for hb suidlnce in lh' aF 

.r€conomclric l wonld ale st€oia[v rhlnk Di Shiliq ur R€hnal! Ch8iman D'pantent ot 

Eoonomic! fq cll lh€ dchl suppon hc povidcd, smetin€s going out ofihc wlv lo heD me 

In rh. cn4 I would d$ likc to lclodl.dg. tnc Dl' ofre'fimloo/ dEr hc m!& mv 

ftsrch srt r lor 66 ed -6ibl. 

for thN in dewloping @uti6 lik' P*id3n-

Table of Contents 

22

5.3 rN'truroNsAME.oNoMrcG - -----:1 

s33 l4qttuirwtuNolttutudud'nsoltuftllbns -- 

3/s.'dn|9!n6dfu.nfu'@NhANlfB'.''' 

Frqr*efdi|eltal*ndF,*ldl|g|roratR|oeai{q|rqoc|l 

uzD 50d[ rEcrGocns p&al r 

721^c'|4dbne6c4obq''''''' 

--- -- ^ 

-- --_-_ 

cHAnrRT a*€NorA:D5acoR6u$orrk!lNDExotlN5rtunoNAtroso 

l@6,ircno{A!)^roBaBrrqas " ,' 16s 

PtEtr,iwtfr :{rtFrgg{+{qtiir{cFo{rE.lq4i+rr|lrs6-_ *:-'- _r|p 

s.2. D^rA D€{i froN ............. , . 

s.3. R!6as!oN Sft. acAnoN...... 

"1 

15S

4.7, 

3.3. 

qrm}||6rm,lisADc.o*d 

9,1. 

@-*-1" 

10.5. 

11.3. 

turwcw d ouufl d nsnMrqr ^nD 

d'rsr!$.com|mNdiiA 

fddrc GrMr n PantrN 

IHrMdrdotco{o{ErircTEqilou6loD^r D6drmd 

E0FRroLtusd5^xDAx{6s 

i|srlruDorcM.co$wG|ogB 

11.5. 

ratrtrxrrr4 amrFr*. -! i*--:+* 

Mr reEr^|5cn6t@f,nY---.... 

......237

List of Flgures

Na!:coi uGEMsfl_ 

-*-*-*'n 

_-"*-*'; 

rd.G rfr Er E|g.tr*@Ertu4wxD-*--_--_- ---_-"*- ; 

rs.t: rrtbrs|ffi OdrirEd{tr$}- --__-___--'---_-__--- ; 

r.rr t5 ErFgEtFlE6t---__-__-.-------_- ;; 

rds:ror.E.!6nkffd|Du 

Te'ilig*lc}sEeFq&fi 

rds*osrEB----

Part 1: Introduction

Chapter 1: InFoducllon 

Tte Elaldship b€tw€ somio p.rfodaM t.d tllc qltlrtv ofdoncstic institltions has 

eme.8d |@tly N a mojd subj*l ol inl{Est 'lh€ litdturc shots lhot highd ihe quolitv of 

domestio in$ilulions the beltet lhc cilec$ d rhe Hrmm dcvelopm.nt and gm*lh of a 

cou.rry. Nonb ( l98l) tbmliEd rhe sDdy ol innitutio6 ds a spoEtd di$iplirc !d pDvid$ a 

snd theoElictl ffmewolk 6 to h)w lhcy idF.t 6@mic Frfodre' 

Thes iditulional 

dlrmiG m rhe@i@lly di$s*d in rh. smic liLdt@, howvd rc'v liltle hb b@ dm 

empirtully. Tbis th6is h . sall sl.p in .n .rlmnt to mpnic.llt t.lltze lh€ inpa'l of 

iGtirurions M @tmic !rctlh. Sp€jfdllt, n prcvi{rcs ! n..s aor i'siruidal qulitv 

lh{ @ he usat ro cmprE inrrn ids eB cdnrri.s' rhtn ticd io find ! link b.l@ 

insiotioBl quli.y 0.d $srrinlbl. cmomic SDsdt Thh ontibdr6 ro insd$rional 

IiteBrG .s n provids a n.r atpmch of alArcSuing difeFnt idirotbnal medEs in ! 

r@instut dd compdblc inlq ofinnnuionllized sNill cthnolosi6 

1.1 Back sround ol the ltesearch Problem 

sBl,imble economio sowth bi.gs cnh6ncal qulity of living oa misss lher€bv d{E6ing 

spolial inequrliry !s w.ll os pov.rty, ThG .ncouBges narions io slrive for lona sp€lls of 

economic grcwrh b ehiev. rhc l*el oldcvclopm.nl and sldtudl change Equir€d lo cabh_ 

up with rhe developen woild. How€vd, not sll dtjds srcced in lnis en&ald despit 

implemqring MnMic poli.ics considodd oprimol b, mi.st sn thdi6. The diffeft@ 

amng @unti6 sp*d tajEtory @uld b. .llriholcd io ihcir inneEnl inslituliodl

cha@&nsrics. Slandtrd crcwlh liLdbE i.strds insrnurional {t'vcloDn'nt 6 incruft tl in 

achieving susuidble stoMh si.e all orher facloE suld hishlv dcpend upon $c qul v of 

i.snulions.Iloqever.i.dilulionaIlitialuE,tllhoughnosl€ldborcriveo'theorc'ic!|osp-G 

of insrimiont ndly n d4td lh.n dpiriol a+'c! Th'E is nol m*h dDiricdl wo* ddne 

lo 6*$ lhe imt@t ofoveftll instilutions on eononic gorlh -ftc hain hinddne muld lE 

rhe availabilily of instilulionil dar0 thar could be ldlcd on empniol groun& lnstitutional 

qualitt is moutld in .mphi@l lir.dh uilizins d'k bas tmvidel 

bt veioB omm'rcid 

or rN4nmcdal oBanizalions Vanous siudies emplorins rh'$ trda sue trcmDl b 

aggEsate vlrious innnulioml D6uE to lod sme nsningtul esiimat€s of insn$iorul 

qulity rclN utioB. llo{.v.r, lh* cffods ic tor nDd' €rclusivelv ro judBc th' qDtlitv of 

innituids bur lnt ain i! to nsuE otdll @n@ic pc moe oths fe* fNus 

€xclusively on inslirulions bul l@k aa3re8ation, i.e liev lel! ahddl whal in$nu$ons nafters 

bln do nor fs6 d cxrlaiiing how thev lll fil it io d@id lhc ov€Blt imrg' of cdnsier 

insritltioMl pcrfdtM. F4 ldcmpl€d ro povid. 4 aggEgat 'll@E of innilulids but 

they w@ on ad hN bsis, cleltlv lqcking $!nd th{reliol i$rifielion 

Hend' theE is tt'd 

lor a n.* !t?.Mh of assE8aring ditrFnt in

2) To &vclop dnd lest a m.lho{tologv 1o N$ lhe ble o' insti$lios in $*aiMble MiMic 

3)'lb dlwl.rt dd 6r s mclhodoloe/ !o effirc $€ iNiudi6 smw$ Es ftr k*i3l!4 lh€ir 

inpad o Pakisrs\ odi. Frfollrr.M atl @!sl Elarimship bell|@ irblit'nio6 dd 

L3 Aenenl Stotzmenr ol MethodologJ/ 

This lh.tb aiLmpll lo 0sg lh. ole ol innnulions in $sbiubL .o@ic snfih rd uiis 

portoe, it sll tust ficnpr b obi* dif.@r idtii$ml n66 in a tBninsful Mv 

!o quanlilrlively m€src insrnltional qulit, @ds ountrics- llis lhesis pnpos l'dcx of 

Inslirutionlli4d wial technolosies s !n oggEsote mdsure of instilutional qolirv Thh 

assEsrrio. is dorc in otjdtivc ndnq bled on hituipal comporcnr mlvsis l'stilllioB 

c lggEg.t.d in tedr of hN tlEv inp€.I th. gbsrh plrss' stcifiolb lhouBh Ed*iig 

n* thcrcby incMsins Otduclivig s.d cudin8 En1 stins oPponu'ilies o'd div'rting 

€soudca losad pdlDctiv. lclivili* This esrch pi'$nls thE i'dices of institrlions The 

Fid ind.x .ovid6 tr6uE of insitrdml qulitv of t )ar co€nng E pdiod of 2m246' 

Th. @d oe is basod on at€6ge vllws loibble fd c|w sridd s$dv Thc thid itrdd 

basod on titr sies, excludvelv feues lo h6uE insrirulion.l quliiv of Pbki$tn acro$ 

tim.. Tie n*l last h to enablish die lint b.lween i.stitutioidl qualitv dd $slliilblc 

dmic 3lomh. Th. indirurias indiF !E Btd in ead&l gtNh mod'b ui'g 

rdd@d dslJlMic teli.iq6 Ar li6! blsic nod.l EpEsnling iNi'urios bv ptnel 

inder i3 l.sred 6ing cG slional p*l OLS as well d GMM bNd dvnanic panel 

enimdio.. Th€n rhe blsic g6${h mod€l condirioned to fit $e devcloping cou nd 

qyitunm.nt rnd 6rd m dcwloping sutiB BinA m stioMl it'i€x of innirutiod In 

thc n.rr Fr! inFcr or insdinios on domic Pe.aoMcc 

is cslcd aing tim. si6 dah 

for l'aftsra. .mploying CMM intudl.slimdion tFlhodolos/. l.lh' od ousl issu' of

inliillIim gmlh MB fd hlicd is addFs.d aing rh. Johte'Jelitrs oinreanlion 

0hriquc tud lhc cdnror caus.lny t6r 

1,1 conclusion ol the theti'" 

Dc rh6is ddu&s lhtl i.$inniml qudity is impdtdr &Lminart of snlidble d'mic 

gov,lh, Ituiilutims Dlty ! piv@l rclc in so*tn Pnls lhrud d@6ine fte risk of doing 

b6ims dd enablint aviMmor or inDlrlion by plusei.g i. nnl sking opportuitid x h 

.Lo ldrd dEr omg rs kids of idhdios, A.ri€l se.tinA inditdids e mft cffaire 

wry of eimulalhs eb{h dln dsk rcdrci.e in$ilutim tus[ 'ldming innhni{B dG n{x 

sem 1o pniuce d siSnifi€nl impa.t on go{1h in cNounbf envionndl' The Esulls 

remai.s uNhmg.d in dcveloping countsi€s' eltings md in$ituiionl Elms 'sp"i'llv plugging 

in mt sli4 ap?ononi6 litc clndio it ld'd b b. esnrill an &vclopm'm lscnda Th€ 

.vil.E of ovq8.@ is.l$ l€sl€d md N sign of umidiliDl mvqged fi)nd bul is 

condnional upon $. qulity of pllwle institullons I is $rpnsi4 to disrd rha! whon 

insrirutions gnMh dtnamics fd Pahisran v@ rcsb4 nsk Ed(ing inslilutions sm'd to 

iifl|rc me ild s Ed Ekhs inrifutiod l. frl rh€ imp€4t of dti Ert sking 

idihnim o e:{)nffiic IE fo|lrr.F of P*is $tEd ro main insisnif@t Ine |n6is llso 

conclo&s lhol iosrirdrions ond grc$(h in Palisbn aF @inresnted and rhus cxhibil a Elbble 

lons run pl io.slil Thc crugei ctuslny lc$ nndinss indiotc lh|l $€rc k cleor Ni- 

di@lioml lms nn calelity betwen insliluions i0d Cmwt\ it wltich' lNtitutioMl qulig 

qls dmmjc gDuti. How€r, no.vi&n€ *6 fMd f.r slDn nn oDelilv in uv

7.5 Oven'lew d Contcnts 

TIF rh.sie is divid.n inb six Plns Inttdclix! liLEluE dicv, i'ni(s crdid! dPiric'! 

dalysh (cN @ulry), dpidal mlris (Pa(isl!i), ed @lusion Tne h'dluclory lsn 

dt inr lm ch.Dree And $. intrlduclort ch.pld chlp&t 2 giv" d @ ol hislo@tl 

sp*lh Frfdlll,|E kl 2 Rdiry of lildt@ dllitr chtFd m su$imbk goM|\ 

inniNtiss ald mDiriol nudis, Ptn 3 orlhc thcsis includ6 tm ch.plo' chtFd 6 Dnents M 

ind.x ol iNliluti@ti4i did lchmbgns (!on l) for lh€ p.tiod o1200246 olcdng 84 

@ntris. 34 dala sc.ggegaled inlo 14 idicB Cltd.r ? |a@B dE i lx with 

.os&ti@l no&E 6wing l4l cdnti6 dd IOO &b sG sd lhF e osst4'r'd inlo 

37 indi@s. Palt 4 oflhe lt€is aitu ar €spnioillt t.sling rhe co$ 6u'!v i6p'ct of innhdioDs 

d !rc$rh dd imludls 2 chtlrds CtlFd 8 disx,s dE in!*l of inEititidl qul'ly 

m6!Ed try .bdemq aoncd !{ftl itxt,i, d saeliMble @l,Mic lD*ln 

Eing veio6 cl6 

ssdon .nd pdncl L.hniqc lhd include Ol,s ds wll 6 cMM dtomic p€ml 

'gimdids 

ChEGr 9 di$llss rho in!.d ofinnihnional qrlitv d CD*rh 

of45 d't'loping Nntits uing 

cN s..rinl ndiirtdrl in&r Pln 5 otttE tfids Fltilbnv fds o Ptli$n h imlud'! 

two ch.ptq6. Ch!fl.r cslcs iniiul'oool indcx for Patisrr for $e penod of 1984n006 

'0 

Bins 12 d!6 eu6. Tn!.d€ot of inslitltioul l.dcx o @mnL p€rfmu@ of tuknlln 

ic |ho cmpindl! rsss.d 6inc CMM mdhdolog/ Ch.FF ll hdi!|b 6Bl 

Eldidship b€trq inniu.ioml qulity ud ddmic pcrfm!rc in Parino using $' 

.tohdeJ@lius coinlegdrion l@hnique lnd fic C@g€r c.us.lity Lsl- Thc lasl tarl oflhe 

dFis $mruia irs nain fudinss shng wilh o.ir pol-v inpli{51i6

1.5 Li'',,L,'dol/s of.he t''fls 

The najor isw cdfrotins lhe thesis is rne .vailstililv of darr $res 'fhis could b€ the 

|!sn *ht instirutiml lit.m|ue. nos Gltb@tirc o $octisl a5pets of iditulionr' 

mostly ncsl@rs lhc @pticcl sp.c! Data oamon of 1he indi€s m'Nins dilfcE spel of 

innndions @ rvailable rsm 1980\' Thec ft eme indic's d'suring 3incc 70'g' bul lhts 

hsw @nF6tiwly sroll 6vdgc &d nG y laus€d in polill't Md huns flshis a'6 

olh& inDorunr o@ like coruplion, buBucratic inemcitci's' 

jusli@ sv*cn' cnd @nt&l 

.nfo@dmt ,cre lsse! n.gloccd ftcE ar. conside6ble l4ger numh€r old'lt soues aid 

in$iinidrl evcrns! ancr tE nid tin li6 but rhev e of iBgul& ft'q@rct wtrh saps n 

dif'€Fnl ycoro, whicb is noi viable fd a lat!' panel analvsis That k whv o$ paoel indcx 

cov.. 34 dari $uc {s omp.Fd to lo0 eurces in cos sclional inde* Th€e dltr $uds 

tunhd de.'@ b t2 in N oaline si.s @lyst for Patisb 

Ap,n fton availability, rhoso i.stirution.l i.asEs terc llrgclv bas'd on sud'vs ltesc 

streF rE md.lly bdsn on public od bIsifts pecFid thlr @ d bc t*tr liom Flitv 

This ould F!d@s bis hcn@ onplmking on d' qulit, of in{itulidal dl! Mom6' 

lhcE c@ld b. spl. bies l los.v€., bv inclusion of Le' 'umbor ofdae soures' lhk bid 

The€ colld bc difeEnes in dda collerion prd.dDres md oihq counlry_sDccific fodoB rb0l 

odd n.*c @Fnbil'ty dilTFult Howcvq, rh* iNritulioMl nj66 Emin ldcllv

Chapter2: 

Hlstorlcal Account of Natlons' Growth 

Performance 

llitund gDMh Frfom!re of n tios nomallv followt difidt Dorns' This pDYid's 

c&eflions ro the rule *r bv mi.stsm grcw$ theori* $ar el a fixed p5trm for 4o6oric 

grcwrh fd lll ntlids Sone @mmics erch{p, vh'6 dl6 lait to qLh_uD toMtd 

susllinalle gowth htving implenent d noft or tes similar policies This uom'lv coold b€ 

l(nbutol 1o munLy speilic f*b6 ltEl due pt'h d'FndcM snd de& a$mplids st bv 

Counrr,6 p|6@ difr.rnl Dolici6 fc th.ir so"dr traiau*v Th' pioGG of indNltitl 

dovelopnent, c@l Britlin dd unh€d soles puNe grotrh wilh littre or m goredmenr 

int.nenlio4 putlt fiMc€d bv piltE enLlprie- He& th€ gotmncnl mlc {6 indi@l 

povdins 3ubsidi6 to privtc iflcsrDent sooe h&'omt6 iowlrd susr'intbl' sowlh ew 

difeMl ond stracring apt@h€s wilh tctivc inwtrcmdl of 8ov'mmflt in planning dd 

inv.sh€nr. CdnLies li*e f_m@,cerunv Sptin, Iblv, ond Rush dd ht6 joined l'v 

lrplr! e{ dner involvcmmr in indusritliadon D@ss bv qPablc gorcdmenls othc' 

E@p.o counlri6lik l).nn&k Netherlsndr swie'rltn! B€lgium' dd swcd€' pursu'd 

llroscthq ! difr€Fnl pdh lowrd lhis .da!our' Hcre, lh' goveddtnl tule wa! 

conpmtivcly les rnd in die alorcsid Durc9ca ountties Th' gov€mndt w6 mrnrv 

inwlvcd in .shbt-6hing dd slEngd..ins insliotions thal diBrlv nElen ftc @.mic 

go$4h. Oovemenl iNread of giving speilic Fogms fd stt@tudl d'veloDtnml 

impdved demedtic inslitutions, maftel inniiuii@ Druvidcd nnrNs lo aglicuhml 4d

dspoddion, d*elop.d dablins hunf Reurces tnd st an excnsive €suld|ory 

fd.stt ro avoid slsts tnd b provi{t sbbilitv 

orhd @unries lhot ltu c.ugncup thc sDalh b.nd*!gm aho putsued ditreMt policit' s 

th.ir prcd&srs did h rh. induslrial rcvolution ln Esl Arian @onom'es' solehr'nr 

sdoFr.d o divc ot s rh. LG con.6 in indusoial Evolutim Th'v di@tlv inlolv'd in 

ptdning .nd {teElopncnt idc iryins trl invdlins it sto6 lh ould lard pov'& 

dp.Etire adwl!s.. ln mntls! Ijdn Ancrien @ulri6 w'rc l'$ involved in dircotin8 

€oononic odirnies, md insLad, fausd ddrc on sial developncnr' 

2.1 Ct *'th ln developing dru"d.s 

rreveloping eunaics hid odvml.s€' of backwa.dn'$ Thcv weE nol involv'd in 

cunb.tsme F@.ss ol inve.tioB {d mth.r ho@w techmlosi's rm d\*elof€d wcld ln 

rhb w!y, ttEy @ld c.lch uP 10 $e d.wl@ wld TlE choi@ of lalmlos/ in opcn 

n.*cl u6uld dcFid d cNt 's giv€n odN@ni sobE H 

pu6led pr@tive indunridl dd Mtomic policv 0in lo delv lhc compaBlire dvanugc 

dacmin€d by ihei. c(torMt slructuE to follo{ ft€ w.si'm sttl' induslrillizltion Tn'v 

E on simibr scsi.s, which *@ puocd in nrdufitl doluriM Md msidtEd ! 

{ir.ing .ombimlid. 'Ilcy haw f@ued on Emoving dbbnid3, liniting gov'mmc't 

in|.flcnlioos md devcloping institutions. llowevor, .uDi for a iw, bv tud lorse. ihct 

gto${rr p€rfmsnG h.s nol b.d sglimblc Their Erewlh is bd6f ed pasld bv nmpanl 

irtl.tid, nsi.e in qulny ud Pn sial indic.M Cumul'riw outpur hls &clined in mor 

ofrhc counti6of thccmmo.@llh,eit6l lnd $!thd EuEp. d ltlhic Egios 

Thh o. b. evid.nl from Fisne I ond 2 t!l@n from Bam dd Sllt_i_Mortin (2004) lhar 

digl.ys rhe *id.N oa convaad@- At.E!. cDP gmwlh nE lor th. p€ridl of 196&2000 

is Elcn m yair, whc€s r-dis d.ricb innid inme Fr qpiir'

Flau!! t dilplry wld 6Plc of I 14 cMt14 ti!.6!sl no ti!||r ofcw'iga4 

,1'e'.t:c*.4'/er&,5'.* 

I T 

t Ill 

I 

I 

.': 

hbi-r.9hFo.)

flgne2:.dv.ryr..'G.Ds.nFk 

E 

I T 

t 

I 

n^-r.ro 

a. t.| t: 9t r@ 

L{.rF.*aotb lro 

tuh4$! tuoM) 

Therc sns lo b€ liule o. bn posilivc El.lid h.twcn i.ititl iMtu ed av'Rge soMh 

sc ld dE wlI mpk. on dE @ntnry, lhct gmwrn difmlid sns lo he wi&nel 

Howd€r, figr 2 dispbying spl. ol 18 OECD ordieE cl@lv $ow signt of 

@nvdgde *ith a *sdiv. slaoc. Tlis tho$ llt! 8rewih lhdi6 @ wd*i r wtll for 

OECD 6untri6 bd don'r sd to hold in glob.l *nings. This p@r pdfomme wG htlEr 

puzzling sire lh€, den ro puNue .ll the n@$.ry i.gEdi€nb fd su*iMbl. ecomntc 

stowrh. A3 tsaslerly (2001) sbows ftsl tuolos irp.rlanr tbr 8ro*th 

such d financilr 

dc.p€"in& tBde and nMcial lib@liDrion !, w.ll .s improlemdt in i.6lnoctrE and othor 

hunsn dereloprenl indicaioE likc .d!6tion ond hdhh, *eE gem.allv imprcv€d follding 

Efm' tn short, policid prBu.n fd lsr cov.4.n€ rtudlv suh in divcrgoc. 

2,2 Explo.ing the Diw.gqcc 

Abnmouir (re35) abibubd diff.E@ mog @ntries sowlh nljetory 10 inilial sii 

capobiliri€s. The sdy odgiftlly don. for liurcp€, htr .xicnded to olher dev.loDing

counri.s 6y Templc .nd lo$nbn ( 1996) with similar Esul6 Thev ontnd'd rhnr th* *i!l 

qp6bilni6 play r Dle in r*hnolo€i6 rdo?tion F@s 

unlike Solo* nodel vheE 

l@hnolog} is th. em. e,N oounrries Therelbc itstitdionol readin€s is a kev lo economjc 

{helopmcnr p@s lhar rh* d.velotins o nB lel Tl* liN cm'E dd l't cmd b 

indunrial rvoltrlionr. have d.veloped thoir institutions b'it'er 'quipged b handle 

lehnotoeical cho46 ldg b.for $.n go*'ih n@es gdcd (,^deltu 'nd 

xuhels l96s). llFs mun|rjet h.d eovenmcnls $at Dolden 

Moris 1989 lnd 

pop€nt nghq cnloE€d 

conr@$, er.bli{Ed a'd p|moicd n* dd etncient nekets sd ddoplsd tldc 8nd 

fi!ftporraim l4hnolosi6 6 v.ll s ed@ion polici6 $d fder @dnic dewloodm' 

Thee lirlor €ndovhents pbved den.ing lilclol ld 8rcfih !s olho counties lixe Ea3r Asiln 

6 *ll 6 oth.r no oEcD Eubran Mrimt nlving sinile 'nlomo! !@ tbl' lo sudlin 

.lon.mtr gn\'h b) cttding rmp6n demMd lmm otrD cdnd6 

2.3 The cose ol PoHstaft A Ddeloplng cNntr 

To e$ €unttt tpdific dyomics of $e i .ddional d'velopndt tolicv' fie rcerchcr 

p€*nrs Browi hinory of ! d4.loping @!nq Pa*islltr i5 prented bclo* unlitc dnd 

Ggionll coutrics, Pakish wls .n op€d enomv, iighl li@ sllrt, dd tried to pun@ rhe 

policiG d cta'.d b, mi.r'd M*nic lhdisls s nd@rv fc oFimal dewlo?m'nt 

Ycl lh. !6wti did nol rcnlin sunain.ble lrr t94? sh.n il cme inlo being' it was in 

ag.icultud @nny- AericultuE ontdbdci .bdi 53% vhldq ll 9'lo ud 7 3% d 3htted 

by manuf!.turin! od snic6 sro6 Th..n of 1958_63 s.w npid itdusritli4lid 6 

eoEmmenl puco.Il inpon substitution indusrrializarion (Zaidi 2mt Policv bni[ d dualistic 

dcvcloprn. !pp@h. Th€ sMptid *s nnt@ina lhc indu*i6 sp0oscd lo gcftEE 

savings lh verc Invesisl. Thh cla$iosl opilolisl CDMh dd developnenl pmduced ene 

arly re$ls a indcry shc dpnfly gEv Thc policv sms ro b. sllc8tuI md @miri's

like l(oreo adopied P*isL.'s model in $eir developnent polici's ln l%5, Palhtln s 

mduf*toEd expdb w.E grca|.r rhm do* of Sdth r.or.s' Tud'v fiailtnd ed Ind@sr' 

dhincd. Horlq, dP plxs ol intudrillizllid ds B.t' ns b sPdi'l in'qltlirv of 

inon. od c@td difi.end in si.l clas Thc 3oq4h pftes did not ptovc 

sustainable! tnd losi irs nom.nrum in late 60s Lower Ere*'lh end incrc&d ineqDolitv €u$n 

crffi polirical di rboe in ?0s Gulling i. s?lining !p ol lhc turv As tn' tw 

gowhndt bk ch&s. in P!tisl!! a roullv w Dolicv b!*d o pG$itlii aBadt sG 

intoduc€d. Exchdg. nlc w.s devtlued od mosr of dE Qnomv wd !'tionalired This now 

.pprcsh horevq poduc.d $ne quick Esults 6 €xp"t shrG Epidlv exp'ffrcd a'd 

c@@y pictol up sm lrlmnfim- tlowkr lh.! tao, Fnv'd u$dtimbk 'nd rD 

rcplscqj by rhe 3d *.v. ol policid fausi4 on libcnli22lim dd ddgllatim Elscd ctpial 

conlrols, ddlic cutbdok in public spetding, rc{lic'lmd ol dom€stic cutr'ncr wilh 

i .narioMl nwters, I'benli2.ris of tldc rc8imes, ldse sl' Fivtrizrid ud abow lrl 

6Mcid li6.6lidion ltdgh m0*.r b6.d mrcL.v policks FliI6 s' to obetu 

Fe$ing on hdk l-b!$d ircEsl ntes, intsdrclio. of op.n dtttot opcnrioni Emov'l of 

cEdir eilinsr etc., *eE sn s htrlln.*s lbr the new lib.dliztion dptlwh All lh* 

haroB gd b sr.vd'riin! dsbl lsrin bul, N6lL MsitFd uNa.afrn it srimul'li's 

.4@y lowlrd sunoinobl. gbMlt Bt dd l.rse, tlis Friod 

wiir6s'd hisl infltlioj, 

uncmplolmem md low 8ror1! SMi€s aiming tl dalvsinS vhll q.nt wone; laid th' blmc 

d Gnl sking, Tni. .d @@ic policiB F{6r€d cdr.ftn wandf'll sains on t $ll 

gdp ol ldpte 

(HNin I99; Din &d Abt6. 1999I fm cmPh' Din ltd Abbls (1t99) 

argucd rcxlile indusrry d.spjte @iving pbl4tion undd hiSt &rili3, $bsidies! .(@$ionv 

nn.ne, h!v. not able lo lchi.vc hish erfici.rcy or divmitv of hilh v!|re added Dbducts 4d 

.s . twlr its s|i.F in th. Mnd h't* dddsd n6n I l% in l9t9 b 2%

2.1 Poncy r4on8 lor g,tstainoble grourth 

fic lbllowins e lh. su€cBr.i policv sdk vhitL if &hide4 ould l'!d lo suslainlbL 

l. Macrccomnls 3ilbilityr cconmic shocks div€n $' los'rh domenon ADpdpria|e 

sh@t ab$rt u shdld b€ in plr.G b @ble loe irtudo $sraimble 8ro*1h- 

Polici's fi't 

imtove n'l:irMnomic sribititv i.clude srEngrtunins of d stsrcm' hpsvddr of b'dgel 

indihtions, eEnglhcning fisl institltions at sub drionl l'vel dnd ooct$ to inl€ottional 

laquidiry al tin6 ofcns. 

2, Public Inltltullons: Tllee arc a kev for n*rl)mnodic mtMeencnl emcienl op€oiion 

of m.*e|s md c0eivcrcs of stuhl €aods Tle inniNd@ imtls imDlm'nbrid 

capicnies, cuib lhc Nnl stiDg opportunnics 5nd enable th' drEpMeun lo Itke sisntl fM 

enisnnenl4nd c.Pilolidd $e opp.nuniti.s in inrcvativ' tcrivilid inelr{liv€ inslituions 

mt only inc@isloldoiry blsi6es bur.le diwn l@u6lion tmdrctivc *liviti6 

towad pEdalory rcd se€rrn8 

3, Fa..fti.l Ddlop@t t).rgulaiio t.d op.tll6 o' finocial mtrtct! would h'lp th' 

Esources @ch rl'et thev aF neden $. mon. E3s of l*ss to li@ce impoved 

.faienoy oi ban*ing inslituliont 6 well a3 fi.ir Esulatory m@hnisds miDimizins bant 

fliluE rhdBh cntbling cfiicidl nt|Nid m!n* dEt d'rls with pFblms of tdrcE 

*leclion rd modl haards, atr basic m€$fts for nmncill deleloPnenl These 'lons wnh 

mpl.r€ m.rk l of iNudrq @uld de @unlrv d feq lftk gowlh hjEbry' 

4. InLBt cluE: Povidin8 b.sic infr$lrucrurc h & 's$'ti!l detemiiant lbr inrenmlnt 

lnd sFnh. tnlrstructrc inv€stn.nt have huse extenaliiid Hoce prcP'r iniisttlcluE 

wolld mve busi*ss nom bw pitdNrivilv ltrp b the pdh ofsMimblc sowrh'

t R.sioul Idlesnlio.r Resion.l Daniciplrio in world mo*crs in ptt$r tim's hrs 

jncEed sienifi@nllt Drnmic expon st6 E ping baefirs ol tEgidsl cmp8dtitc 

.dvanlrg€ tE th€ k t ro susLi.0ble prcgE$ Rcgiottl intsntid cpt's a'mi6 of slc! 

competilion dd sDeoialialioo Dd dep€ning capilal, ldbour and l@hnologies markels 

ClDluri.g Esiod .xren.lities lnmsh inpiorcd fttworking 'nd spci'liAtid or p'lducrs 

ond wi6 @ld b. o bdr.r snltls/ lhln b.ing low c'd gdcnc ptdEr' 

6. Inpmved hrdN rd 8i.l opit l lrcus.d cffciqcv of humln tE$Gs would l"ds 

io inc@sed labo( pDduclivitt dd 8re}1h. Humon c.piLll, ! bisg'st snd kev resouM in 

pddNlion D@ss' would hishlv det .d upon eduotional 'nd 

v*ariml tEin'n8 

instirfions. Soi.l qpir.t is etul in @ oa insituliq'tt fsiluE d!' 10 dcf itnt d 14* 

insritulions. Fomdizlion of *onmv should b€ dom in a Mv lhll s@ial @piLl lill ml b' 

cnrled md should only b. Eplrced willl morc cticient *ial qpittl 

?. Tdtnologi6 dthila @!E dddd.lt choiE of tehmlo$/ shauld be such $dt 

i n.@h6 rrE qifir 'wuc tuc@ Crpibl eving ioctmoLSid slsld b€ impld'nlcd 

for lobour dhnlda ndnons. 

3. P.6por iNom. gre'th: Covr'lh sould only b. sushi"ble if n b'n€lils lh€ pdr' Mdl 

3pclls of swrh in d.Eloping qfries onlv bqt.fits sall $gncnt of si'q' *hkh k'& lo 

sp.till iIMe in.qufty- fien gn*rh ..d 9mctu6l poltci6 .ih !t @lhg tutoE 

conpaElive advdt!8c, fdg€r dbort ft€n pssnt, and 9mr.n'l 

I'hdur tbundtut s'oloB likc 

asicultuE Eoaining lm8.ly n gteoted ll.ne inc@eed plduclivitv of*clo6 vheE ntor 

poplLlion @ .nCtg€d i., woutd de eiliMbility in sovnlr 

9. ErvimlDdr tunhbiliy: rdg on gowrh *ill 'wh in inpbwd.frcieftv on !$ of 

naiurt Esol!6, Dlpletion ol lhes r.souMs *ould gMdv hind$ slobal srotlh 

Ilcrfodsce in rimes io con.. Enrionn.nhl rosrcals involvc slenalili.s rh,l lcld to 

.@diMrid f.il!e. HN.vq, cponsiblc sov€nrctr 6uld chege $.n pl*nr in order

prcwc llEir frbe. A. ihe 

extenafti.s by crearing fr&kers 

lho* lowoing @bon .misioB. 

nrdmr, level, govcmh.nrt 

fo. envitunmsnully sustainable

Part 2: A Review of Related Literature

Chapter 3: Cotrceptual framework of Sustainable Economic 

Crowth 

seiMble .6mic aro$d! tG bdn . pol!rutrl objcliw in dcvisine dl)|@ic dsri6 ad 

policies. l hedd{l contribulion k, grofih liteduft on b€ lfl€d 6 @dv s Adam Snirh who 

*att ',rt h4nnt itu N@e di cNs o! tlc w'dth of Ndio8'" Ititrwilv rcGing d 

*nmic 8mtrh. l he l&n six dsdes h6!e wihe$'d cnomous tojv or Egmh on vMoG 

d6is ol sr!,imbL groltl ttl ils d€.qnidnrs' whicn an h'dlv @€r conpl'Llt in this 

Ei.*. In .his chaptt, *c will fidr bnelv Evid lhe €votuliom'v ptw6s of the rrE@tial 

litedluE on rlE (b.diMnts .r susuinatk s(Mlh tnd lh' mr'burion! of diltlent eh@ls of 

thdsh! i.e clasi4l, srnxtunl chuge, N6-CINial. Eidogcnors gto*d s'hlmFicne 

rh€ory ol ioovario 6 well s olhs rhcoriB slighrlt diferina lom st!'ddrd go*1h 

lihluc. The 'gEh *ill .ts ttrsird b Eviry rlE dtibulid of @isa si 6 Soiln 

1776; Ricordo l3l?i Schumpdcr 1934j Hrtud I939i D'oti 1946; Itodd 1943i PEbish 

1950; Nurte t952ilrwis1954: Lci&nscin 1957; Hi6hne 1953i tmsodTodrb 1970; 

Solow I956j Swan lgtc anow IS62i Ron.r 1986; Lucls 1938i Abrdoviu 1986i No'rh 

l9?3; t ndts 1993; Pddi t944;a@ 1957imdMokr' I9q) 

The chrpb is orgdniz.d 's follow sdids 4l h 46 rcviN rhe conliburid of dillcEm 

eln's i. dE &wlolrmn of licr.luE o Cdrn $oies sid smnh pi{rE 'o'k And 

stion 4.7 ll wlud€ rhe chrDar bv giring sumoor, ol ihe d€vclopmqt of GcoEriol 

libduE d esinablc Mic gtoMh

3.1 The c,d,stiet Theory of Cmwu 

Adam Smnh ( I 7?6)t sdminal wolk, @n b. cxphi'cd in Lms ofrhe followins sinpl' supplv_ 

side diiven pmduclio! tnclion 

Y:r (L, K r) 

whcE Y is dlpoL L is lab.r, K is capihl dd T b lttd Cds'qsntlt. output grc*h (aY) 

6 dn6 bt Fputtiion srew$ ( '), inwcn.d (Ad and lDd goBlfi (dr) d'l ircE.s in 

ov.nll poducivny (A,r) Hre Mmnic sDwlh orld be €*plaincd alons the lollouins 

Accodinsly, dt output srol'lh Bre sn be d.t.min€d in lems ol srevnh de oi ill the itpur 

f6b* of prld@rion, which trn ho*qq, .nnog:ndnv dehined For innd( p'rulalid 

goprt d.Fnds o fie ldel of !ts'm, it6tnor de!€nd! d evings, l$d goMh is 

detmin d thMgh @nq@sl of rew l.nd ts wclt !s cnh@c€d fslililv of thc old onc- All rh* 

rrcion will in lun d.p€nd upon gowth ofoulN natint snfih is selfen'@ing Theonlt 

thins to indu@ !rc$,rh 

is division or ltbor (sp@ializ.lion) s n nak6 feto6 move |o*ad 

th.n comi6 of sale. Adan Smnh al$ !dv@.lql lhc 6le of i €matioml tddt in ddvi'e 

division of tab... Ho*vd, sp@ioliarid is limnd bv li. tul of m!*trs so md'rs 

shdld bc fe ed cfficienL M@ speitltrlio wdld c@G n.w mltfi.b fd n'w p,alsrs 

having cmnmi.s of sles. 

TheE is yet lno u dffiimnl ol susloinable 8olth. 

coNrh is also det minsd bv evjnS' 

*hich, in tun, d.!.mims thrcusn lhe po,iubilily oidpital sl&ks This pmfitbilitv co{ld 

delin. in th. w.k of mpctilio ol qpit.lisk lor wd*d rh.l wdld inc@e wt*€6'

mdginal wlgcs he.F lowd profib !r, in hk view, lov'ring living stfdatds of wolk€6 cm 

Thh goslh ote$ 

fom of dadY n& e@d 

sr&ly sbE so*lh is {isliNd s c@l 0 

elotive pri@s rcmlin otsLot ovet tioe 

is sll daNinS brt @l ai cledl prlss 6 cerhin eiling 

'xhibn 

9 | 8), m.m 'Doponiml' go*'n in 

Smith's view Mlin€d ! D€t l€mi.el mo{t'l for $sllintbl' ers{h 

' 

danner thd 

Tht vs ltt'r modificd 

bt Ricrdo (lsl?) pdpcing led v.riable i'qu'litv howevct' lix'd in sDlolv 'lrlisexhibils 

diminishins r.lums ror ldnd This lixrd qumitv sill l@d !o hishd M|l ol lanbw6 owr 

timc, .s *ell s inc€G in pri*s oflsicultft mmnodiries This wiu 6uh in highd Blge 

dcndd by d. qolk.6 Bdn ft. inc€s in Ents of hnd ed mg6 or *dt'u would cut 

inio pDi6 ofclpiLlisrs.nd ulinaiclv etinls- $cs would Bl@ lhe ceilins on soMh as 

n would d.olinc tfie lcv.l of i€jdv shi' gDrih Howtr' Risrdo claims th'! lhis dali* 

@uld b. checked in shon run thdSrr roh@losical enhaMdenl lnd speilliz'tion- 

Ri€do, l!l$ on, ponn,5 a fudher dismal ticlurc 

as the idcree in lechnologicol 

al[ttMol in lom of .ficitcv ol dNhiftry vould dtpba |thd Th* cxlta labds !e 

nor sbertEd in Fodrclidn as n Fquire a cdlibl tlons wilh ldbor -which is nol dhplled' 

Bu b kdD. lcwl of dpi6l b l or diq noE clpid smuhlio is EqriEd dd @ld 

only b. pcsible thrcWh incr@ in elin8s And sintt stvitss rre declini'8 ovf nne' rh'E 

is no.ths reh€rim !o i.d@ gto*ll 

L!i.r on, popllation SNwti nod.l I'oposd bv 

wirh eo popul.lon gro$h rnd opiLl @uu|!rFn 

th.8rcwln flw$ s Ponularion gsd urld .or dep.nd uFon th€ lqel of s$endcc tnd 

{ould qDictly oMip sto{h. 

'Ihm6 M.hhB {1793) 

would tunh€r brctk 

This would tard lne @n@y of low equilibrium ma*.d bY

mi$ry od suhsistcG lev.ls of living Ho*.v.r, tlh sbsBrtm' I*€l oould b' avoid'n il 

't6iliE c[6k!' lik di$& ild Mrx rFHliw biin dhl nlcasc *r 'dootcd 

(Hrmd 1939i Domd 1946) loruliz€d cl.$ical coMI dtori's in Hatbd_Dotn'r Ere*lh 

model thlr k dpLincd h€low 

Slving: d.xprs.d b ms of P.Mb8. of Ndotl in@' i' 

wlFF s (S.viigs) &Fnds lpon the sving dt (s) ofin@m' (Y) Inrcn'nl (l)' s b' 

.edsd in tlms ofchme in c.!ir.l sftks (AK), i'e 

l=dK- 

And since c.piLl sl@ls b.d a diEl reldi@filp whh in@m', it ce b€ exprsd in thc lod 

ofoDiht @lFrl itdo (x,/Y). H.@ opilll d$n 6tio (*) o t' qpr6s'n ii thc follo*'n8 

k=lK/AYdAK=kAY 

..dbeletvings.qutsinv.$rc.t(S=l) dt'qulnmtppoEafollo*: 

DMding boli si|.c ordE .qutrid *qld $k h' fin'l r@ vit: 

Gmrh is joi' ly &{min d by eving ate tnd oDital dnFn d' This is tull nphtneil 

st€ady slrt. sroM\ 

in Lmt of tlelod_D.d8 'w!fuLd gotr'in m&' {h'E b'th t' od 

'! e h.ld .o.emls dd.min.d do*.tuslv bv indihrtlod snjnss Thit is als' Ih' 

@dirim ofgood. m&i€r .quitibnm ln oe ol€l grdn ncn alM! lo Mt'd swll'

snpply slppB$s ddod, md exss ep..nv is eeneBled Thk sould lad !o tudher 

dclin. in dqntnt at pople will inw3r l.s Oild w.v .mnd ir @l sre*h 

*afuEd gr.Mh, lho ddetd surlM sur'9lv n*ne D"Pl' 

ton cFn. DoE doand leadine 10 tuntd imEs in D(nBive ctp*ilics 

is m@ rh 

r' i'Er nor' This will i' 

This 'n€mr, ssdt glosln palh is inherentlv uosrlble equilibnm ohd oll€d 'Knifq-edBe' d 

only iability 6m.s when gb*lh idY / Y) is equal to (s / k). Anv slisht shct @uld lsd lo 

pdmr {t vi.&[ nm Frh and kiu norc fudhor a*v 

3.2 The Stuctual'charye Zheory 

Most of the cconm io policies shaping lh. wo d jn 40s and 5{h l'rge ly adY@dcd ineNd l 

chogF d r prc ttquisile fc e.Mic d.v.locmnl. (Rl]gsin Rod'n 1943: hcbkh 1950; 

Nu** l9t2; ldis l9t,l ; ttibdr.in l9t7; llidh|M 1953)- IlF simplifi'd amonj6 

inlo durl s.cloB rodcls - ore wirh low prodstivily lnd low @h, uh'|6 th' orh'r wilh 

high pr.duclivitt and hish r€1ud. Th. Eolldarion of f€lor fron low prcducivilv to hi3h 

pro{t@rivity siou would rcsult in suslimblc go$lh- Howeva, this trNition w b' 

hrnp.rd by srdoldl risidili6 lhil Q b. of eirh.r Bhnolosial d ininuidl MtuF 

Tal'tulo8iol 'igidi.ks lxs in |gms of rehni{l M divisibilirv rhlt hldt ro 'rLndir.s 

.nd @ ordidion f.il@. Insibriml.igidirb.pFr in $. fl)f, of misi.s ht*cls $iehs 

risL The$ rigidiis Mke th€ errdfi 

p@c$ non lind lnd cxhibil lw pFduclivitv |rap6 

Hcr€, fi.r is c role for Bovmmenr to put lhc sotumv oul lion ihe low prcductivitv lmp' 

C@rdinaed inv€simd. by govemmdt in. pl..n d damr wold pretid.lhc e@onv a 

''Aig Purh" jmp e.ni.g itdeir snd plein3 aotmv o cptLn 8rewlh Flh.

The (:@F of big push *5 givo bv Ptul R@n'in_Rodt! i' lcll in nh tnich 

"Pobleds of lndu i.lizotion of Elstem dd SdoEd€m Eudp' " t$cnins rhlt lhcts B a 

md@nrary do3 indusi.: This onpl€menbrv lods b coardindid ftilurc N iie 

ider Dobl.m s.ls in fth is peiselv rhc Fton or look oi crcwlh in per cou ries This 

idd * lomlliz.d bv Muphv, shleif6, and Visl'v (t939) wh'E thcv shoued 

oodplen.nkiti.s lmong industritl scloN wh'Ebv on' $chr nised eize of na el tnd 

.r.nDnd ol dher sror, nllrnu othcr sta moE fisri* wh€n indulritlizins ach d 

clery scctor sinullln@uslvi pmbloo or@rdinalim faihre ls €movcd and txhibils posilir' 

Fruns @ @mpldenbrni6 .1 indunry lcvel €vd who tll sios ircur lN3 if lhct 

dsided b industrialie aloDc. ln thb $q nob.dv is pF[€nd ro p" the bott of initiat @sl 

who m @ld Folit ltLr' This *dld ldd ro a s ordin'lion hiluE md could k@p lhe 

ccommy in und.Fdcv.lopndl equ'libnm llq@ $ lep lhe @ommv fFr low 

cqnilibrilB mp, c@diMl€d inrc$ml" is neede4 vhiqn is sllcd 'Big pBh' Mn4hv 

ct.al. (t9s9) orend.d rlut'Ris plsn is Fsible in .aoni6 in *hich indusniiliz'd fims 

optuE in $eir prcfic Mlv . fr&rion 6f rhe tonl @ntibulid of rnen inv'stmenl b the psf s 

of orhq inluentlizing fms " tted plann'n brgcelc invdttrdi poi'cls aE i*d€d lhal 

*ould cnploy incEdins Elm lsoh@logies in mov seotots c@ling dcmond in othcr sdlo6 

in wlu. chtin 0d E$hiDg in c.tegddr ol m!*e6 ln lhh Mv' dcv'laoina @@mE m 

caFm thcir sualus lab.r' Apln lmm inddsfializlion, invcsim€nl in inlilstrdcrurc pDl€r' 

hving $i.l bocltu dcetin8 si.l osls, shold tbo bt unddbkcn by the govcmmenl d 

il nomllly ftquning llrgc iNdn nB !o 6p the benelits ofexEdlliti's' 

()!nr .dvl)l:e ot tnc det n. oa indusltial chdgc h!v' giwn onpctli.8 tlens in lhit 

Egdds. P@bish (19t0) seu€s thal incom€ .l61icirv ot &mmd for mour&rdP! gdds is 

gMrr th! $d for pdmcry goods. rI€@ qloB of p'imnv gods *ould &cli* ov* nn' 

s irqom. imltcs,'lhiscould alrc.lhc Gms ofnade fd developidg counldes iflhcv do nol

purouc indusli! lidion. l.e ibensreio ( l9 5?) &l!N.tes the rck ol i ndustria liation 's it fosled 

cl.menrt suct s @gcrial slills strd lnhor ELrios' which h€ ells rh' X€mcidv la'ro 

Lewis (1954) grve his duol wlor .xplmtion o' cmnomv A hdirjotal sector wnh suDlus 

bbot wnh I Isl4llv .ltrdc lab'r $pplv cune ard low pnductiviiv *ould lad lo 

subsisi€@ do@mies *irh Erc na4inll pio!@riviry of labor' dd M ind[(rial scctor ba$d 

in urh6n rds exhibning high Lvcls or Frduclivirv lnduslnrl sd deY€loDs bv &ting 

lrbd fm laditi@l eclor' Modov€r, sin@ ldditional sctor is dlhed lo h6re unlinir'd 

supply ol lobd tt a cmplativ.lv low w!g' l@dins lo lhe e4attio or induslritl $ror 

snd it will *lf sustain unril all sDrplB l$or & lbslbcd in induslitl sectoi However' lhis 

lndy loccd c icis d smpnio.l grcunds lor the posibititv of k'ding b a subsl4riar 

inc@ in in qulity lmong ditroGnr sbd Besides, sunption ol sualN laboi w's tle 

ovcrlhos e 6pind Sound s no such oals exi$ sd if n dG ilrs of sesdl 

nlruE. Tiis would ewElv voke. the tsnp on oi mlimit'd snPplv of l'bor !t 

ooop.tltiv.ly lows *t8cs H@.t.r' on. slighdv dirrdni n'* Hiahns (1953) nesit'ng 

|h. pnmipl. ol uifmity, oEntd thal ddnomic gEwlh k ss diveq d'nlndjng upon 

rfi. 6F.t d @w h€e and @nonio idctuE' B@r of Uc s@itv of d$ision- 

n.king s*illi .quilibdlm wol

n..ds cotms uirhin *h stor (Stlscn t986) Sotrc ttlrihr&d lnh lo E id migdlio ln 

p.niculr (Hdis dd lodm l9?0) d rhc p[!@m.nd of Egid lml nigntion in ptenl 

urh6n u.mdoym t poved it h quire dion.l as th. dohion b niSllrc is b$'d on 'xPccd 

inconc difcMtisk b€tw.dn nral sd u6!n $loF ralher lhon jlsl vas€ dinbrtnthb some 

viw th.t this sudden wav€ of indusrrhlizlion would produt goods lhtt fa 'xc4& ils l@r 

d.n |! .rl rmisn .u*.t 's 

is liditn duc ro p6@irc t€nid Tnis btds to 

.lrd.rirc .p9.6c|i by a brand or b!.rc thcdn (Kru8s 19?9 1933: Bh!8uli 1985) Nho 

cmphai$d $c inFd.ne or b&|€.nd advqr.d rl* Mov!! o't!d' bsn6lo lubstiluL 

pmblem oalos 4{,Eeal€ {rsnand. 

3,3 Nao classical Growah Models 

Th. qlrc SroMh in tlrid-Dome nodcl! is inheEnllv une,ble od uv d'vidid nm 

*.nnrld 8b*rh nte yflld k d b tunlEr novcnc !w!v lion lh. rishl c!)@ llows. 

th's conclurion wG otesl€d lat€r on by {Solow 1956; and sld 1956) Psposing thtl lhc 

s1.rdy $ft loMh 

mle is stable dd dy devia,on would nove lhe @o'omv btck lo the 

Thi3 hod.l k @ued "solo*s*d" or 3imply tl|. 'N@ldi€l gn*ri dod.l ..d it !llo*3 

Frfa.1 {bstirrtio bdsa qpisl sd htd, th.l *s mr llld€d in tltmd-Dor r modcl' 

This natu rh€ c.pilll or+d dio (l) rh.{ @ onsi&Ed mBmE in }l.md-Dolu 

mo&I, is Ddiourly 

th€ adjNtn..l foctd lading lo s1lblc ouilittiud fijs Ei.6 th8r 

d.vi.tion arm Mblc sl. Nolld bnng arcllonding chsse in k, dalin8 thl @nomv @nc 

brck to lts st rdy st le. lrs @ncl6ion is . big d.viatid rdm .anier modclt pop6ing lh.t

economica *ill conve8c to de @e lcv.l ol incone ia thcv htv. lhc me 6!. or svin& 

dep@iltion, bhor aou srof,th, od pbductivily gro\d This mod.l is illu$dad b.low 

Y = F(K, r-) 

It is rh. prcdetid lndion of $e e.n ol aom whe€ Y is sun.n b v!ry olinsuslv *nn 

K ond L due ro smoorh substitutlbiliry, tnd al$ exlibils @nsranr Elums ro sal. Dividitg 

Y/L = RK,a- D 

or, loting k = I"/L, we qn rcwrir€ lbis as: 

v-I$) 

This mans ir MDd p€r l.bor is deLminql |nrush opn.l Fr labor R@lling rhe 

ide.tities i s = I ), !d ( S = sY ), ntking ( | " sY ); 

U{ngth. qnibr I'g\. n!..llnrnt p.' labor I i t n r lunchon Jf 

For crcwrh @tin8, 8o*rn 6b of L!h} (L) is d.pict d by ( n) bas.d on F0ulatid 

g6q$ Bte tnol is a$uhed cxosenous. In cas oizo investmcn! c{ital lEr labor ( t) will 

dalin. .s labor src*s, e lo lep ir ar rlE sn. lcv.l, invesimni equtl to labor lel4h 

Equi&j. So thc niniorl EquiEd Bi' of i.€tn.nr is 

(n) h 

Ho*cvcr, if we lmDnt lor lbe .fial of dcp@iation of dpital, then &er. should be c0pital 

sm*rh in pmporlio ro Dopuhr'o imBss a wll a d€p@iaiion ofcxpitEd dPilal. 

Sp€cilically. we nor h.vci 

Hc.q rhc EquiEd 6L of invcsnlcnl p€r 1.b.. ( i ) is srul b ldbd srcwrh mre (n) lnd @9ibl 

Fr lubq (t) aD'l BL ofd.p@idion ordpit'ln&ks {O. ftis.l$ mas rhe Equicd lewl 

oa tnvcnment io nainbin a rkd) lL

A dady t is '!qun!d fo. sadv ct c sD*d\ ti@ rt.tt4' in k wU 'li" c'pitrl lo 

hhor rfo, shich I|6E I chos. i! e|.riw frro. Fi4 As 'L$ftcd 'Dov'' 

Crwdr det not .lLo* tnv dtusc h E|.|iE 6ctor Fia3 oE tie 

!-d, nt|. 

Fis!rc | d.pid! lne troduction nr@don ( v - I (L) ) lloie witlt dtc !'tuil Gquilibiiun) 

invcstn ni ftNrio'\ ( i = sl O) ) ud Equnld iircdMl fttr'ti@ noI In@4odting 

d.rdirio ( f = n!,I ,6ik ngw 2 imdDoc. d.FEidid of60ittl st@lc if, ( i')'

.,q?.:s..adrseG66hk'.|o(5*a6fudhful.L 

Y=\lL 

IFX,/L 

|tgu'..:'|.od|.s|obclfld|hi.lov'NnGM|ihIE|Hvl|nd.red@' 

i, 

r/G) 

r:'= (d"t} 

i'= nt 

ts-K/L 

H.E, ( k' ) EpEsri srddy slor. l*l of qpit l F s q, *n@ *n!l i.vdttdr i3 

.qul b reguird inv6h.nl d Bio ( ir ) dd iicone pa vo*q at ( y' ) This eqdilihritrn il 

Mbk si@ ey d.viition (kr md k ) slDrc id b.loN dE ( k' ) muld sv.rge t6ch ro ( k'

)ov.rrime.Forintuce!ifourinithlcapitlltotoborralioisal(kr)lhotisb'lo*(k')'lhd 

th. r4uir€d inrdh€nl is L$ lhe acrual invc$tn.nr ' ( I > i')' nding labd sFwlh is 

slowd s cmpolel lo €pibl SF*d', osulli4 in inc@ of k' md Yi@ vcM CmParine 

rhc t& fisuts, dE slofe oflhc 'lqnircd inveshol litc i'hre teme s!@Fr 8nd $ (hc k' 

{ltany sne Erio) woull b. low How.r' lh. quilikium iM' 6rB wuld al$ be 

lowr wh€n dep@iarion is &@ntcd ror' 

'rh. oonclosions .doFen in neo clGsioal dodel hstc l& @hing 6n$qMces panidl4lv 

in rhe F6p6livc of th. devcloping @unri* 'llis indicaa lhal develoPing sunfies wolld 

grcw fsrcr lhm dcv€loFd counlries lhal will b. lowins at a sieadv sllle grow$ dlc 

nlrch.d br' lopuldio. sro*1h As 0 Bul! lh.E woutd b€ on!er8e@ in $en in@ne pcr 

Hd.d, se srddi6 indidte lntt mwlgo@ is mr mmdniod bd depolds o leic 

yn. of which e Elr.el to innnutds. 

3.4 Endogenous Cowth Theory 

Endogflors gFfrh rhsry depans fom its n.o clNicsl counleQad bv Elaing a$uBptions 

of d in inisbins Eruns io sc0le ind p€d irlins incresins Etuns to scale 't nalional level d u' 

to .xMliti.s. This offl€6 ihe Daturll lc.&ncy of dininishing €rum These 'xlendlities 

@ in thc rm of lding by doing lnd incrc h clnularivc knowled8E be lhd is 

cdsid.d 6 klmlosiEl inp,svmdls ll.@ h h thc.tdoe€nic icchrclog rh{ ws 

@Bn|cEd dog.@s in M cla$i6l nolcl' 

Tn. abov€ cr ilhsrEr6 a sinpl. ncl.l of.nddscnos srcsrh 6 p|ltosed bv amw ( 1962) 

h d€rives its kchnical undelpin.ins 6on Koldor ( 1962) turolion of r*hnicol prc8Es. A@w

contends thot l-cdinc is a fu ncriob of o m u liliv. idvdloe't o f knoNlejge ihat is' d' loltl 

nck of kmwLdge cdLd e fr- This mds th lfl Bhnoloeicallv adva*€d n&hi6 

not only incMse fte labor lriucdvn, ol lhc hb.6 wo*i'g 'n 

thN naelii"{ bur are 

i,c'€d lhe bbor p'!duo1i!hy ol rhe hb

In lhis equ.tio, 'C' d{Es.or hove 

.xhibit a condrnt re|un |o etl.. 

' \ubqnpt i, B i 6.rr?mtl to th. fims Th.Efoq lims 

lldl ot Btiond levcl, G - K, sid il is only rhc ocoumulatd slNk ol copild for ltE domv 

Tn €fo.e, dE dioil produclid nMid bks th. following rom: 

Atuw mod.l erhibils eveEl Blriolins asunDlions' a mojor one is' thal is for $ incd* 'n 

E!rm\ t-rh lab.. atd uPibl should b. pEponiMollv ircE s'd Th* Enndtos td' 

Mor€n in !n impruv.d mdlcl ofqdoeoes 3rc*ri Frpos€d bv Rm'r ( 1986) H' dc'iv€'r 

Wh.E y is Edwh mb ol odpur p.r qpilt ,nd n is populalio Ab{lh nt Wilhout 

kmwl.dca spill ovcr { z = 0 ), pa EDib iMd. klls@ M(Fvd' if z>0,lh€n t n 

> O, hen@ Nlpd p.r labor is incErsing ln this s.v. gbv1h t d.riv'n bv eving and 

inv€shenl d€lcmined *irhin lhe nGlcl, nor exogenouslv dstcmined lechnoldgi'ol 

t{rcdlitid & bc inLrulizql ar rem lcYcl. llow*r, s@ mod.h lik. Durlaol ( I99l) 

als prcved Osl thce s b. intemlized it l@l level in fm oa l@l complendditi.s. 

Conplmenlariri6 ore backlaid $d loBord linhlsd that slNr infom.lion cosl and solvo 

o@.diturid fiilurc (fiiNhnm 1953). Durlrut( 193) 'grr, thlll 

''tutui.h&l iuloht t dhibi! ,,llerroities i. ttuhati@ od M lhnzd hr lo.ali4t! 

kcln'lozicd hnthtudoifts. nek cMplewdntti.' vlet ttorg .Nugh *ornd 

prcdrce nuLiph aq llh.lua k lohg-run

Th@ hod.k c..tv quiL e6 inplicdion fq .@@ic lto*lh Fis! th@ is no fo@ 

L.ding io cquiliMM gD{rh d. ebs cl4.d 6o|mi* lh't *uU dtFd !pot' th'n 

ndiodl svin9 a.d h.h.ologic. Ss llv, d4 i3 m ttn&mt of dtch'up lo dch 

ccotmi6 &*pic hNing 3inihr Foplhrk[ sd svi'a! nct On th' @rtrv' o' 

d.*topir8 ...lMi6 might oltu. hirh F'un o inv'stft d& lo loB opit'l !o hbq 

Erio,b{t it Gfft.r ilcod.d intbs@ d @Ptdoltit iN6nr in GdF'rid ud RltD 

ln $q( f&rd lik dduLlio of hlnd c+ilrl' llgFh ed &v'bprnl dd 

.x6ullds eir.d in fm of kdlis 6v dohs sdld 3bF ttt @mutcid of 

rchmto6/. thG wld b. $ucr !o iFadng Elon b eL |hs n*ing tnnt indifr'Fl 

b drir.l -Mllirid t .9ina lh. noM[ mma|lm in log run 

MMr, KtwLd$ A t*u cfcild io rahtulolv rr'otdd Frc6 G tbo qni{lv 

.hradar upd cntllpc*uill iNvoti* *tivilk3 lh.l ii on &F!d uF t ftc qulitv of 

de i.rnuionl .rt gmali Aeddinrtv, d. hild of dtr8.r in lts d'tlo,td 

@n[i6 @ld h. .[rib[!.d lo lw lcwL of hd! c.plt l od ttF &frciq rlwbdSt th't 

lc.D rlm in ld Lt.l of d.dy d.& rMlh vi|n lowt Fld''tivhv ' @Mi6 of 

stc TL nl.oEMl of hums oDi|ll horcEr i! i i$ 3iN' 'duli@l €Piiil niShl 

norh..wrysoodloxyfdhufuctp&d(B.ih!ib. 

SPi.8.l' |991).

3,5 Schunpeterlanfhary otlnnoYadon 

lti'dLd gtod liratuF .hPlsi6 iBrte in Fldudilig 

though Lchtolotiol 

ddclAo.nl6 tlE ot ll.m fcsulrri U. d*lo'l*ft if, long M Tlcv howv'rd'frd 

d.Frdi.g uFo s ro shr d!i6 t&lDolog/. Ei&!.lM gtoyih th@ds chim il lo b' ! 

6Ndon oa disrdl nat of tlwLdgc d n d{b&mat &tdnir'd d'@gh inrcstno( 

in .du..ri{b rld R&D ThG clsiol .d M clsi.ll lilc.l@ l..t tu mFlling tt@ns 

!d sanply @!n-E n 6 miac HorylG, iE mlorirn M b' r-'d in dlid 

drdllidl lil4|G MGr not$k b ScnunFLr (l9l l) hlling $od of ddLing t holirh 

rhary of Gco|mio gosr||. Aldsgn nd csiddld . dtrn d 3lo*d! dFv lE oltliFd ii 

d.r.il ttE @i.! of anM.rio |n!r ldd to G.[mloiicll cnr1 Ttis slion it d'vorcd fd 

cxDlD.rior of hi! i.L.s !d cdLih|tio |h.r h.w pd . hu3. inp.cr o dlt6ic Inann 

,cpt A. S.hnpda! Minirl vsl'1r,.o,, of E Mic D.ulop@It (tgtl) dtt 

"Cqitdlird So.iditr dltd D.@rtr' " (1942I fds o. FFlwtl is E8'd'd 6 

n i@.io. iMing pFddivity by ulilitin8 oprr.l Dd hba Nng d |ebrcLSjqr 

inFowrts. Unlik S6ilh!, nb nod.b nodlt *€p o|hd nddt qog.|@ t ld .ttibuL 

tlE tujd dliu fd srowlh to stoir r4n nqml.d dE{sr in @Mi. 6tiMm.4 dict 

h 6r y b.6.d upolr th. drl!|qsr inMdior 

H. cmnlcd rbr $. mnjdny ol ..dmi. .a.r r bGh.E in . dtir focrid md dlt rd 

.ndg rtsr *c .bl. ro c|||ldg. |l|* rrni*3 .rd b tnna chogt in o!iB. ll@ na 

@d6 *6 crar.d to b.lollsd undl ct lloS.d b, M. othaoc ft schmFlq F l3 

"r dwry oJpol. vttt 4 tlt?.r lN.lIer.B ad thn a w aan. hd/Attt \N PriE 

w cott i,en@. ... ?rp, ieE k d *n st ld nltunv-at l thk M art . It h this

tw d ffi^ tk fu.bni. equilibti'n ana Ie! rkt vitho't tin litv H"bzs tut Mi"er 

ntu ihtplicdiot alailuz wilt inllict tpor hin or m wlP'kr ee?4atu dependnE tpon hid 

will loe t]&i Leep lot oltl oEe .. flt l&itlve mone n th'refrft ePrsr' and tut nPnb 

'r'sisrr" (Schump.to 2002, pp 4!r 14) 

Llis dreo.y of emmac .volulim sn d nn sl,gMl @nmt, qoding in t st5Lm er bv 

lhe roulires adopLd by lll de age.ts 'l]jc Firsl enftpdeur erch's 'd gtp6 and oGE 

rogerh.r wid lns h.lD ol brnko othe6 seeins lhisas I pofil porsntill' would alsojump 'n 

srnning simih. pdjer lft v pove succqsful, orhe' 's'nt aE poed lo tro choices' €irx" 

.d.pr ftw mliM n loe de jobs Thk would @E hugc distudt* in ihe $den moki'g 

n€w innovtrivc reurincs exc€td $e old orc. A, a duline, rhe sysbn co'Acs along wkh il lh' 

erd olnew enrcpr.ncftal innovalivenes in o ncv'Fendiq p@$' Thi! ple$ is *t'red 

ro cs fearivc dqslluclioB A.v new intuvaliv' oulircs muld op'n up ne* polit avenues 

'or 

cD|JepEmrs, ed at mN e indNcd ro idovlle amn, swrhl' Holqer' 3s 

dtEDend6 e s.ll in nmbcrs' lh.v disip6r6 kavina cltitdisls to @mp€b t*av $' 

exkline pFfits cauring d{lite in $eir idcomcs' od dris declinc {ould preielv led ro 

Mother innovarivo cftons rtenc.! inn.vaion l.ading io cftdriv' des!ruction is lne primc 

d.remiMr lor surLiimble gD{rh- schmpct r d chlE teritng @rcmic agpnts in l€m3 of 

individuls md l..dq:t ec 

"li.ticaly Al\ed hatu nds M chzdknAd b, sehtidlr d'its vhgt th'r hN leMt 

by novinC rithin ,hs @i'ed houdaris atul b! hzvi,s h a &t'tuking -a, hen opntioh 

,lkpfitim atr! b rMit i.tl*tucd ht tlP. s er dda oJ thir tead La&n d 

ct@terik t b, xeitinA E|| thitE\ !', chatghE tle t@iieA batn'lari2s to dcn beh''ior 

and bt .htnsins th. EiEi dda of irci. c.i,f; ' {s.hump€d 2002' tg 423) A nobble poinl

is |nar the bl. of ldd6 is ml lo dcvclQ id... bd lo implenol tlsll. 6 i&as sn b€ 

d*bpd by individotls, bul wnol b. tdopLd with@l lanl€B 

Unlike previo6 srowtt nodcls rh.F aoMi.s dd in .llidv tt'Ntc, sctup&r chins rh'l 

lh@ reF no dininishing t lums io inmvdio.. tld@ lh' onlv |€.s fd ee€dv tltle is 

when entEpdncun.l .,tods !E dncd uD, Howct, li'hMFl€r lavs dorn enain 

p@ndilios rr innovalions Th. fi6l ls thc s'eLm ol pivct! ow'cahip; lne s4on4 cEdil 

svsilability. bNckins lhe nle or riMnciol innovaln,ns lnd dcvelopm€nl' 

schunpec. ol$ Ndincs €noin ce3 whcrc sowlh and innovdive pi@s b@ks do*D ond 

Ef.r them 6 *ialcultuml chdges As cnt.4rir.s !rcw, {otmi6 of sc'le nav l{d lo 

lemmntly 

hign industisl cmentstion .nd @onmi. dds TtL wdld mke il difficuh lbr 

@* entr€pEn.m b b6k in $€n lmlirt tnd inrcv.l. M@€', exired oiplwuB in 

qbpris Bw ale ,!plac.d by bo@octrlic Magc6 *ho G la apt b innohr'' 

Ashid ctal {2004. Ps 54) smmlnax s.humpd€r3 lts'v ot@omic derelo9'ndi in de 

''(i) Ttp tuin totru of kchblosied prcses it i@vatiu; (ii) iwwtios ehnh lead k 

tJE idrcA@id of rev pn lrclkn P6eeer, tuv Ptutl@ts 

Nv narag?@"t wt& an'l 

rew orsuidkh of prodetion @nv|t q oe .eatsl h, elftderested f^ etuelercua 

ed reemhz\ *ho etp.ct b he Btddcd with (hotop'|v) Enb i41h2 ed th.t tlEi 

ttuwtjon b src.s.{tllt inplenentedi (iii) h sePnl, iEs. Nrcpolt Pna oe -e"tut, 

disipate4 B tle N pw6es or yoduts innod@d 6r c@d imrtu becow 

o\elet vlEn s imditu e.o thd .ompe!. wii the catuit t chnlqies ann icebr 

tltiE En o of lt2 Mtd "

Thk dEfr on lle dphh wny tldiliMl rw1h th@i6 ftikd 6 cmpidql gt$ndt 

Enoiricr' .vi{rdc fd b.* ol ndlsad gF 68 8.M 

in &wloPing 4o|Mi6 ould 

bc d@ lo ifppmFi.L iNti|lniml dn$m.nL linidns attpceuri'l inmv'tic 

Sinil.dr, @ of tlt @mplid3 of clt$iql t|r6nB s $.1 suOtB fund! 

'nbin'd tlsulh 

En6 of ti6s wld bc Eincld in brsi*s.n mili.8 !..106 biggd od fiEling 

|..cfmdion, HM6, tlw fuG *a us.d in mn p|ldudirc 'E likc @l .g!la This 

@rd b. lriblrql ro lrk oldnlFHRhip rn* ca.L cultdl.td i'dndi@l b'ri6 

fii'd.r dE crftDaH6ni! F@s 

3.5 ALenntlv. Theor''lcot Con.'lbvalons 

ft6 srion is &vor.d lo otlo MFllin! vi.B iqn disincr qund of 4.|Mic fi.ld d 

sslrblc emmic 8Dwlh- B.h!vi6l eolMin nolrrd.d bv qFimod dmmi6 

.!d d@mic ,6ycholosJ, h.rc qwriorEd lh. rls s irimlirv dtodi.d in clld.rd 

rrorrh dEi6 (C.ldwll 1994: Cdlislq 1996) .td h.b.d Efir govll mod.l lo 

i@|!onr. boulcd itmlity (coc d !1,, 200r. Ptniclh.lt c.nbr (1996) 8e 

Mply dpiric.l cva&@ ro .mptsia dE idpo|rlE of ll6y ol boudcd r.ridlatv 

sqlins in c@mi6, On. rtiC ly dilf.Enl sl., Sd (tt99) g.w . n* didrib of 

e.|Mic &rcloorat dt di.d ii ft!.doo Not dt Feol clp.bilit6 hrt si.tv ud 

cuhd !t.F hnx ar!.dom io d" This 6edon is nol .tddoi. b'x Ehiv. io si.{ics 

Hde @mic Elf.N *eld cft fiw iMin3 tlF fE dom lo et sa !13!6 tn.| 

poliriql litqri! .c dd.y td $s.idbL d.r.loFrar" 

EcMic hic6n b€li.v.d thl lro*lh is polh dcpqtal bo*d o hictrt. P.c J[pcs 

DGrd *nts of hi$ry shich @ a. on b.s.d d innnladt Dd olrE. TlEEfor.,

hnolosidl .amullior is shr!.n bv hixon@L sial cuXml md instinni@l liElN 

F.wlen1 in rmDty. (Abdndviu 1936r KM.ts 1963i Ndh l97l' 1990 : rin'tcs 

r969,1q98; Polmyi l9,l4i Mtrdal 1968; Bldn 1957i Ro*nbel8 1982, 1994j Mo!141990' 

In panicuLr, Abdmovilz(l9s6) co cnds $rt neo_clNidl conveigence ofpet ctpib income 

basd on ptoduotiviry jnpmvcm.nt *ould dcPnd uton s@itl copabiliiies of&chtologioal 

adoption. thes cryabilirics develop slos, $d dcFnd upon counlrv speoifio sid hinory' 

Thc pa@ or developdcd of *i!l .spabilirics $ sto.d uP the pr*$ of @hnologidl 

ldoplion is diffeEnl donS nalio.s $d b.s! ulon tlle t!st- H'!@, tF dep€ndcre ol 

notiotu rohnologisl adoption @prbilili.s on .xisrins lcvel of pnnudiviq night nol be 

The simi'tr viw, rollw.i in by R@b.rs (1991) ldv(ari.s potl' depsi'nt Etd€ of 

te.r'nolosi@l chtusts G 6.scd lpon p€nicul.r sqMe of dlkr Mb ot of *tich t new 

Moryr (19$) on expbnDg dgio..l dir@ftcs in tchnoloeicll cBriritv finds ir io bc 

linked *irh physi€l ad si.l .nvibnm. Land€s (1998) iudv bsd d wid. Eneing 

hi$on@l strd€ys exDlotin! the clhuml diftsnc* b€twcn the west and th. Middl€ Easr. 

Asi4 Aliic4 lnd Latin Americt, rldbuLs thc ece$ ol w6r ro its oultuE.dbodied wirh 

post iisloriol developmcnl wh.rhc. eliSious, t&hiological, will or coononic. 

on the simile adun! Pollnyi (1944) .mphdied th.t tlc su@$ oa induslrial Bolurion is 

h6sd on politisl od enmi. iBiituions such as fr.. md*el svsten, gdld sbnd.rd, libeEl 

srrq dd politictl @Pditiot.

on i slicr'rly dill@ni n&, slnn (1957) iisDlidb shoneinss of lh€ modm dtv 

caphrlis 6 htving destoy.n rhc inloml 3v$.m ol innhnids tnd dbl @pibl in 

developins cou.ri.s od cral€d lsring condirions ol dcFnddcv !s rhev b€code 

suboidirutcd ro lh€ d.velot€d @Dnti* in fic inr.mttionrt divkion of ltbo' caPiblid s)Gtdn 

gave rie lo nonopoli€s rh|l cdt Dror4ivo &nts nomlllt exulced fom $c d'velopins 

ounllies. Undet lhe$ condilio.s, BaBn advooilcs thc poetite ol€ ol the sttt in counttina 

ihe goqinB llndqcy ol undeFco.sloption ott plagu.s monoDolt cepi|llisn ln this wav' 

Mnomy nish achieve the lcvel ofvhd he lems ?@tdr' snomic surtht, Nhich is even 

gMr€r thm rhe pdstial 4omic suolus 

TtG ulls€ctio 9nMi6 d* tuin ,indi.gs tnd mlEiN lhlr l6w m l9 and 

Eviwing dE !ih@ e in€imr rhdi6 dd rh.ir lpplt6rims in E dewloped a dE 

The lh@ri6 di$lNd h@ m ala$ic.l th@ry of gmfih, srdctuBl{hm8c thory' No 

cldsiql Cowd, Modeb, Endogono$ Smwlh ihoryi S.hump.r€im rheorv of imovatioq ts 

rell 6 $n. Altemaliv€ lnsetical conlriburione 'nE disousion oathe* ri&ies ltum simple 

delemlor 1o *Keynesirn giv.s d b€tlcr iGishr int! de .vol iomry Pl@s ol the eDkh 

liio"tuE od uderslodins ofptoblems th hlvo dcrgcd nqn dm.lo time &u dv sinsle 

dEry. Fe dmdq cl.sic'l th$ry viss Sowlh 

prmc$ * s.lfcnlorcing, enhd@d thrcugh 

speializalion ed emcieni 6or*.6. llowcvcr, vie*s dady s|!l€ €quilibrirm s unshble 

struc$61 ohoge drcory sdvNot s lh. @llulioi of r,ctd nom loN prcderivily lo hish 

ptudDclivity stor Nhich euld csull in susbinoblc go{h 6 dtdiMled inveslrenls ft 

necd€d ro y'dc olf onlin..id f.iluE mong @mplcn.ibry ind6rri.s. N*lsical

dBirrs cn r€osc rb. .lrsic.t feuLli@ of u rthi. .q!iliki!m' Fopoci'g rh!' dq lift 

dft @ll bc @w4pE ddi @mnt wlth th. s. F oDiti inm6 hlvins 

JniLr sF*{n in eving* d.F€i.!id dd Fod!.rivnr' HMs ddoedds cto*h 

$di6, .ndogaizi.g lahnoloo/ th.l ld @!id.t!d doltmug l'a& ro q'iic ! difr@nl 

oorclusio, i!. lh@ is rc Ln&mv of clt h'up l! rich en@ts &spik nlving sinild 

populatim ad evings d€! and frtou llk .c.unuhtio of hude copital, tEgmh dd 

dclelopnol ed dxtmaliti.s @i.t d in thc fM of l@)ing bv doing wouid snaD' lhe 

@unDlrrim oftchtuloe'. This Muld lubj.cl lo irct.!ing t.lun to qlc dM ntking 

Fnms iDdiffds io opiril gMuhid k .Piig $. 8b$rn Dddn|n it long on' 

Sd@D.&r fdfflizd lcclmloSic.l F!E* B lnMlrid lading to mc cfncnnt 

Fqsge .!r' Fducri@ .livi&r' Iti! liN.lb! i! ldd bv aftFt|F6 lootitrs fd SrPs 

in dMt avid|Mtlo.xt*r @.t cuin!a|mv to nm to. tidq Lrcl'

Chapter4: lnstitutional Studles 

Nod (r99O) dcfin6 instturids s tlz tu\.! oItht s@ in awi't " r' moE speifictllv' 

^dre to the @ ainttes iwotwd in hund irn*@tib': tl8v M the h"nanU deried 

coKhai s d.rled b sttutw ttd inkretid 4 

The ru16 dn b. in |ne fom of tmd inditutios like l'ss fld G8ulllioN or infmal 

on6 llrt Ninihcd b cullud or sid c!9ibl (T.tellini 200J' P{bm l9l) 

Insriturions rcprcscnLd by cuhDnl faclos bv Ttbellini i2m5) frnd il lo bc exose@N 

'I abellini (2005) asns $at iLs inp&t on sonomio develotment ould be 

'elt 

in two wavi 

'' Fis! k btih wiul.apibl tht! k dPttud bt trut ftdins I in otttr PoPte) dt1EspeLr 

kpprcidirE 12 ide oI b.ins Ap,.{t! ol 0!126 in oB\ M clmtlr") k'onAr n nuiu 

.dttb@ in lb iutiri.ha't ttd 6 cdptma codtul (teetinE in @tunl ole\ t&) " 

sidilorly, P{lnm (,993) linds lh.i insiituions &cititrtbs sood 3 

sial capiiol such 6 @cjarionkn, tru$ and cmpedrion Hencc, leble and ompl 

gov€moenc woul{t Buh in wak ud u.-civic $idv ud n *ould Esuh i' poverrv 

Cdhry to tuintu $dghr .har belicv.d intlitutids s b"lcEn thou8h tpprcFite 

polici6 dd agutltions, clNidl insli(utaMl @oMils lil€ v.5ld ed MiLl*ll dph6ia 

thrt inslitufio6 !E moE qn ehot tnd follN palh depcndo@ tnd !E bas'd on ns 

univdal mictu .Lmcnls like codnunnict, .cNoits ard asNiodons Thcv aE buih o' 

p€l$ll Elario6hips od sial c!9ilal (TMt) Howev€r. ne* instilutioial Mnomii Iike 

Ndn, ols lnd witli4s @rend thd cmpelitiN dd poli(iol sldgelc @uld Dmdu 

ad Diaasio 099D r$dradlrydE.

..cos$ry chrnse in in*ndions. I.stitutiool desiSn is @biSuous in whlt wdld b. th. 

apDstri!1. inslitulioml din8s. How.v.r, Rddik (2000) mphasius thlt insliruliors 

engreed in psl*lion of prop€ y riSbrs lid whl insuEn@, d8ulalion' p@viding 

n.c@noDic stotility udjo*ia e the mosl crucisl on6 He frnths Nns ih' rcl' of 

pqnicipdo.y polnid iditulios is dc to!1 inporl4l DOs o'm- 

Ir is wntly e4pr.n flcl by all qun6 th!( hninituB do plr.. t hucE inFd o oMic 

grcw$, A@itin8 lo Ndlh tnd ThmG (1971), sssss@r of itslnlnids *a nol onlv 

simillr to maind@ sosrh ln.drurc blt thdgn de mlid ot lran$tq @n3 Thdv 

prcv€ rhlt i.stirurions aE the only factor th.t shaD€s technoloaic.l adoplion p@sss At 

anorher plrce. Nonh(1990, p.54) osns thot 

"llc ktbilitt oI t@ieti6 10.t @|op 4k.tiw hv cod e,{ovwd oJ.ohh@^ it th. tutl 

ik[hM Nw oJ h^bnol lastuioh ai co'te,tPotuy 'ov].A.vbPwd ik the t id 

IngirurioN v.ry in t ns of ilEir inp-t on .mmac €ro*h. som Ptunorc 

pr.duc. glgn.tid. They rre simply 

n whik dhd 

"M ikentiee lwture in M etutun! tud orydni.dio8 vill be c4ded to td|e udvhtq. of 

the oppottunnies rmridzd vithin a siv.n iBntuttonal.fr@tot* Nnnh (1990) 

Mdn @ntriburions ro boden inlitulional lilcmture !F shafd by Ol$n (1982), Baumol 

Ho@.r, &spit dE &.1lhal dE ml. of inrnurions iD slqing comk hislory ha gih 

signifEnt inFn,@; tte mpin{l !rdr@ dc ml mltcl' in sid sio6 

Th€ nd srid is devored b Ndh s n.d .lsiol rh€ory of dar.! i'cdp(Hi.g in$nudol 

dal'sis inro ,Glaicd lheory.

4,1 The N@classicot Theory ol Stote 

Doughs Norrh(l9sr). in his bok hretu! nd Chtise k FtMni' Eisbry" @rli'cs a 

rherr ol sl!r. n innituiioN, exphini.g ho* s!t. shiss a hdare in giing prc!€dv n8hls 

dd cx@l'ns dnB Nmed $ M clNidl fiorv ol slsL, ar nishlighls shdlFming in n@ 

clsid osltsis ud F@s ! d.o.y lo plus ii rhe ssps 

still ki op'n in lh' M clGiol 

'Ihc n61 shon{ning hisl ign€d ws lhal nco cl.sic.l lhory sms pivrc Erum lo 

individuli md sial retum @ eqnst€d, lnd 8. resul! inditidudls ctptuE all thc b'nefils 

'l hlt would o.ly b. lhe o6e in pE*nc. of pc ict propert ii3hls (or ztro lmnecrion costs l 

tn th. prcsne or pdral pop€ny ngh! ns clskd nodel hold5 and deE is no ndn lit 

innnuliors cx*pr ror slf Esulaling nartcis, tnd.djusltDenr su tfiDdglt the chonsc 

'' 

mltBic dE rhc .nmcp in Elstive Fi6. llit chssc tdi@ts fo.toE of plodElio i.lo rh'ir 

nd pmfttabl. rs widNr ftcdol instob@Glt tn 6F.ts ro alhrioN in b'rcnB 

6d codl by ndnnizing individuls. Ho*cE in st sorl4 6 snirh s slei.li2rtion $ts in 

onc onnor lind nalching dpansid ol the mi*.ts. PEsne or n!*els equi€s lh. Drcp.nv 

ighk nusl be e-lBi!e, neNBble ed €nrolwblc B€sides, since goodr &c spoialiad, 

oost ro masuft its dimension dd ofcnforcing i$ crffs of.xchsgq ft huge Exclusivittof 

pFp.rty nghs is baseA d dte nqsurom.ni of lhc utdedying goods. Wh€.lhc$ st rE 

hiri, sme of ib cnddisics lhrt mighl oury sn .ommic wlue, sould .ol bc me.surcd. 

Thir ydld 6ut. in diff€'lE l'€ls€n it *i!l dd Pnvd. os Coscq$ntly, ihc 

ditr tle het*a l'rvde mms.td sid ElMs wnt4, csp€i.lly dE pivarc rctoms or 

idas ud dEn ,pplietids, or orh.r rehmlogiql dd.lop|Mr, is lo gull 6 @opt6d ro 

thcir saial b.ne[b. Hdne all lhe Fope.ty db ae rot wuEd, and $eE tE tBnecrion 

cd! involved. E onomies, i6 pEsnq oarEneclion oosl would Elalively und.r priE th€

sNially cfiicienl spods, divoning emonies 1o l6s .fficienl *lou lnoderlowddofllhis 

pobl.m, Isple d.Yie ru14 of conn6ini in human &lio'i in ihe fom of lts and 

€nf@.n! to sm*h,l t d@ tl'e [3n$rio. qlds 

Thee @srBin$ would qrry a c61 to th. sdup oD thich n is iFpos'd upon As p'der 

meas!ftmenr of indilidul Perfomdca in lh. group is 1oo sllt, dEv rF cl'l&cd bv 

imp.rf.ct mmirding d.vi@s levying coss imp.mnauv ed cqullv ln this w' a Norlh 

( | 981) purs ir 

'tknioel ituItuhluah vill not iwr t E coss of PoliciPdin. jn l44e sroq ulkn *ten ttv 

i"lritid@l beEf^ @ stitl b. Eeive,t by h.ins ! leeid'r' " 

Inditidu.l! *ill disb.t il bsElic ol disob.ving d moa lhtl its srs Mo@ve4 

4fod6cnt mld tho b. idDerf4l, s lhc agmrs of ihe enfo@me tmhoritv nighl h'!e 

This *ould Enlq Pop€ny ighb df(M. imfi{tive ll5 implic't'ons N hus' {d could 

E$lt in no-vi.biliry of uy s&: the twL$iol dwv is &ficic'r i' cxpbjning rhc *dld 

vilh mnslion msts. ll is.qullv delioi.nt in explrinine ovcFll sbbilitv in spnc oi lhc 

tcnd.ncy lo b€cme a fEc{idei. Individuals ob€v ovs when th€n cost md b€Deft dalvsh 

*ould .dvie rlEm orhcoie ThqlfoE, the gap6 it @ cltsiql model c lddEsel bv 

Ndht ndlsidl lfidry ol si.E! fmsing on rs to ho* ed d whd ldel, d'e* prop'ny 

ghls rd €naorc€i. sD.cifielly, it an€dpls ro qplain tfia! d.{it a tossibl€ f!'llB to 

ehtv. susLin'bl. Monic gd*b vhy s dlid enfod inofetiv€ Popenv n8hs- 

'',ln oryonidion vith u conPtaiiw odt4rtage ir violerce .LnAing owt a geographic 

lted vLnk holt dntu M d.temiEd ly tt! pover 10 t6 @Bu@nB 

P'lpary nehs m d€6n d by Ndrh 6

''..tte nstu h elu& o'1 cdt be spe.fud and enfo*tl b, srate ha 16 a 'Mpadiw 

altrwtase inlioletue. ltqc.,h. Belrsrh* 

'' Ultituly n k lc $de t"d it rcspnibb lN lb eftitLa ol ttt p"opcav r'Ct tuttn 

ehich .o84 Atuvth ot eag4tkn ot *ounic 'lecliv 

Th. b.hlvid of nl|g in .nfsdod or ptop'nv righrs d bo @lv*d in Ito rhorns: a 

onidt rhary dd a prsbtory or qPloihtion lh@'v' C'iF'd thort cxplaitu |nc 

dcvclopmdl ofclfioiett pop.nv riBhts PFdalory lheorv derl *irh Fnls inp{ed bv group or 

Fople in pov.r, using stte 6 d tgE rcx lo muiniz' dsn in@Gs reg'rdld ollhe wdfN 

Nonh outliG lhE ch!ru|ltisriB ora uilirv'roxinizins tol't (! sinplifi'd vdion orstc ) 

''Fni, iE eatu badet o storP oJ se9i@s ihkh ve shil 4 Pntrtioh atl jdtice lol 

rcttu. Sie durt @ *oruni* oJ rcde k p'oritti"s tlce etui'es t'ul ituow in th' 

@iet/ it hEh.r 6 o esutt oIM otsdidid tpe'idizks in tkf tnilzt tlun it wotld bt if 

eeh inlrivilul i, wieq pd.cted hit oeh paPt, smtol ttu stdte alte''lB to @t tike o 

disn ituihs @npotist, epdatns erh srut\ oIcoNn@ds at'| tkritias pmPrt iSits 

ld wh tu 4 to tuinize ab E|9rc Asl tht.l le xtu it coattuired bt tte oppn wtt 

@! of i6 co8tihctut tide tfuE atutlt oe Wtuial titdt to pwide ttv sm ftt oJ 

gcre, rivals aE o$0. ptrnrill rules in the rom of individulh or s6les Hene' lh' ftonopolv 

pow€6 e timiLd by dE clNB ofolhd substitul6 $ $c ruLr 

Noih turds spcifps so objative orde slllc .s folloB: 

"M, to spech tlc flnton.at

tuo vithin t'JnM* oJt' f$t oa.div b ede tMi'n uis i" o ef blotu 

MiM o'Au of tk wi.U Ml fuEl'E, ircEe @ rews tu'ia b tc t@ 

TIE Fovisim oa ptrbl'c so.ds such 6jusli@.trd low tnlr outlim rl'e bos of dl6 or 

erchonse, mrde to loee, @b&l Efo@ncnl @sE, e ininudm tulfillina lhe snd 

objeliv€. The in$itri@s hlv€ snomi.s or $alq hene md elfetiv. if.nforced from 

Thft m thEd inFondt implio.tions oi th.s objscrives: 

To tulfiu ft. nd objective, spdi$ ruEl ptorEny d8h$ thal ndinid rho Do.opoly Ens 

Thh woDld lead to spml. spdificalion oi pspcdy risils for dilieMl s*tions oa si.ly 

d€p€ndi.C upon th.t poduction tunction, Ilo*.vc, th* Ents would be inflFned by lh. 

exrenr of nvahy fton oiner poremi.l rihls ro moncaolbt. Th. clNI lhc sbslitule, 6e gEater 

the b!4aining po*er ol d. egn€nr5, sd tlE hisha oppo.runily csl to norcDoly. He..€, 

|he spaifidid of slrqty nshs muld lle d.p.nd uFtr lhc oppo.ru8 osr or 4h 

s€snqr The wnh highs opp.duiry @sr weld ha* moE b.rclining po*6 This *ould 

ale kad b rstu.l dislribtrtio oasBies dEl lo*r itustiotr @d. A@dingly. nN rh€y 

!E ro noE a public s@ds. This *o!ld B!l{ tol oly ii rdopolislic enls ot exFns of 

g6w1h ed inirs nvalry b.N€cn rh. rml ed lhe poi.nli.l rule6 ov€r a egDq! but 

*ould als cdr. rc.ls for thar egnenl at th. extcnse of the &Smenis *ilh lower oppottutity 

The implidrion or rh. sond objectiv. is nol too Sood 6 rhe rul€r. Effioient Drcperly ighls 

(th oade lbe privarc 6te ol retoh apDorch lhc s@ial mte) may leld 10 hislEr inore for 

the siely bur lower smin8r for th. monoFlist 6 lt cMjes d rhe cosr of monilo.ing dd 

collecting L6 e consi.l€mbly high$ ihe ih.* oo* h imincicnl poperty rigl s.

''Tlp cos9 o! ne8uiglE dia.tuiotu of ttu int',/J and outPttB vill 'li'kne E rnioa 

yoperty .iEt t arutue lot ttg .ltwse wkd t iv eowv nhich thttlo4 eill he 

d.p.ne,n on le stde o! the t.chmlog o! mBt$n nt Connu PtuPenv tutuws t* 

peniktl vlcte tlE .ostt o! tuûins tlN rliMNto$ oJ th' retoltuet lwe otueiahed th' 

However, 6 mlkels got n@ emcicnti il wolld rle .hq lh' Eladve price and lhe 

opponu.ity @s dd euld lea! lo ivrlry lo cdptur. it, EnG fod olher mo'opolisrs' 

Motuver, for daorcen.ft ol pop.nv rilhl$ it EquiEs eflices of 4'nls 

to whon some 

mompoly po,,6 ol ruls N d.legaEd !o HMv€r, lh. .g. s' $lf inte'sl could nor bc tne 

se N lhe ru1.5 dd constEinlt _ imposd hv th. ruld ro his .gdlr io pftvc'r drv€rg€n@ _ 

nishr nol tc F.f*l. 

This sould cd* lt nsLr ol $ft of dlcls ftnts lo his tgenh 

lmplicnion oa th* t*o otj4livd *@ld d.v.lop .b.{l tlic tnd*, of ruls to devic dE 

poFrt, nlib $srun tur *ill tuimi2! dE Ent5 ln vqds of Ndll|' 

\e---wi|.tuuas. dLt sp..it.t6i.to ?r.Pctt risltts otttr b ltt &tu ttul tttr @ 

Mitted -nh ttt |'.dthfuini.ne onlaiw of tbe vln N th. @ 

fie olcir adid rold thd bc in onicl *irh thos. n$uts ldding lo sunriMble gr'w1h 

Hdce, sNwth is ! sc of inncd y d6l$ilizii! of dl6. Howcv'r. Ndih l&r et 

''$ hivNr, stu*th it .lethbitnhA, so i re *ov1h vtt" a PhicdtMic unit eist' 'n 

a "o d o!@nqEti"S Poli|cda@Mtc Mttt tulativelt i*frri.ht rrcPery 

natut ttueden 

th. s6ildo|a tl& inth.co ett ol turt .lftoiz|x tuighbon, ard th. tula lit t th. ctai@ 

of etlrclion or of nod{tttts tle lu"&ttu 

rcdw trutuutk, cottt ond ni$ th. tuk ttsNwth 

at nwtunhiP trctore b .n hle th. eci'lv b 

Tfis s$nce inplics that ruler's su$tinable su ivll is only pssible ifih.rc h no chanse 

'n 

opponuniq ccr of segmenb rith thc st|te or rh. clotive srengrh of ile oomteiiron

var, in dl *od4 p.lirdl nEmcidr FoPqrv dgl ! qi4 *tid $gglsrc dtd 

sgMl! wld nol b. .bl. lo iiL bcelh. of lh.it hiCE ofFdhitv c.!lr Ir! E.s '3 

@ic ridiLt io ln. lLtitirv in F cbsi.d @Mi6 d.+ib ' hbha E 'Elid 6r Th' 

priv'rc b.EfiG of mh nighl iol h. Gqql lo ic 8dp boEfltt so' ltt frc 'idq Ddbld 

@ld rn popL kss willin! ro p.niiFE in . Lts. gdp rrivhv' thu! ! tvolt niSl 'Fl 

h.!os' unks i|! Fitrr. tu G Et&r du it3 privtL c6 ld bd lml in tuv 

cutur doMi.s is imDdurlly dE lo ftE tidd F.6ld Th@for.' &v fm of 

iBtitximl ch!€p @ dty cm nqn dF Fn ofrlq' sir lF hls m fE ,il6 Flbhi' 

Thir rhory ollic rs s ol indilulic ttd d.r. dfoet s iG driuld Tlc fi6r ir 

to loqd |ls*rln .oet .d f-ili|Il. .@mnic 86q|h. I* nErindos' lit li* tnd 

junb., pr.r.r poFry dShrs' af@ corfi..r !d dnibit iE4ing .au b sl. Th. 

othd sa is Eldcd Fldlo.t iunn|niot dln cta& lo d[3t d6 bv lhc hling G!|llllorv 

powu. Thc* cnl5 f.q tp.cifc Ftdlld, ldF h dFF to sirrv' .d dn l.!d ro 

diEFim of tdll6 nqr p|ldNli& lo p.d.lory ativili6 a l'ap6 iad io $ri! 

b.B.inii8 po.nbn io !d.0F !.!c6ly tigltts &vis.d ii lh.t nu.l.rF$ of d16 

And dFrukrwillclBEMdgtt tvo vnn tk obi*ri* io Nimiz. hi! inor 

Thb rh6y speif6 . {.r. h.vina Fldbry digin a il is vLw.d r . F!d.to.v Ctoup 

rnrriig .!i qdonins ils corsitlaty- Ho*ffi, i!r. d bc . wlt of lh. @|1rM ncds 

of 0E dsiifty { d!*r di8u. TIF s.od vae .d@14 lh. cxbrtr of tlE d.L is 

ro s@lf, .nd dbe dnmd Flpsty rish. Guhina nn +4iditrid ud divitior of 

hDd. H.@ s.t '3 ditcr @B on of . n .d lo r.d@ a.,sdo dli tlu .t llt 

tulr b.Ffn of o.8|Iizin3 5r.r.. Ho*!g, de b6.fiL c@ 1. cosl, &d lhb co{r tu in 

fmolinFfdnas)mdq ladingbne .rF!6tddllrwldtldwdEvirhility 

oflh. o! i&lt th*fdr, .lE .ffici.n riz. oltlL wld b. rn€ lh. n.tgiml b.r6E of 

low, !.E tio c.c wld b. cqu.l ro |h. migin l cd or inFrcr llE&|ffit

4.1.1 Oth€r ContributioE to the Theory on IndhluoE 

Ndh gj6 rhoEti@l aond,rid dr insrnulions !d plop

th.! belicw ih it hiw .l tk putht to @turdL 12 n.rla Ml@im P@A bQ 

atque b &d with all ttu @tuitg.tid tie tl! platos tuull tl@ equik'btf in tk 

prcjtt. Iro*ev1 tc u,&ntad tltd wt o b.h@iord dru,ptio, vo"U be vtu'g tiB 

owrtunifl ml botn&d latiohality oE codkon hehdioral hats 

Ikn $d MdF (l9AO) .xplah rhe cdetiv.ss of 6nF&tins iNlilutim in tmt ol 

inwstrdr rld llsM .lloclid s lhcy .E infl@...d bv God ofdtra'lina ln @ or 

conplele ud sllc$ @filcring (dEfting I suihble 4ltract speirying ft ptniciPolis 

.ighls m{t obligtrions unde..vcry cdceivtblc dtoudsce} .s .$umed in neo clesiqr 

rh@dca, oNn€d p snEluE ds nol n.icr' How.vs, it Gd *odd a nMbq of ou&oms 

!E df@bk anl.@ il lhey re .I@' .d fq il vutd bc cosrlv. cnM !d lltd 

(1986) tunha cl.boEbs lhli in abs@ of p.rfst dl@lin& whcF lhft is. lo.g lisl of 

righis over 6srs all dSnls tol *rinen in !n sgrt4.nt od $e residul drnts &e ds lholghl 

b b. p@h,e.d by lhc Frchlg- ttee lhc elkr l@ dlc nd . H@8, tlE prie plid 

by thc F@|i'g k dlt of {* dshts wia.. in Murcrs Thit ml6 d' ella llr|s{fr'r- 

polt clusine th. sll6 to u.d.r inY6l dd pomhe io ovqirwsl A tldim sp6l'ic 

intshenr (*ilh linl. or no vtlrc oulsid. lh. 6ladon) is hord lo .chieve a. Ml wodd, and 

e@lin€s rtE ufM drcdlBbr.|n. bllt ol.x pcr stdw TnL wdld dd'r't{nL 

inrcsr,ncnt tHltin8 in imf6oi.mi6 

Olson ( | 932) 6lls innituiios ts mileliv. g@d. He dicnds id: 

'rh. Ius- ttu ndbo oJ inltrid@Is or fm that *o d b.wit Jrcn a @Iediw Eoo4 th' 

snall.r tlc st@ ol ttu eons fun dtd it nt stup ituE t et vill ere to tk 

i,,.Iei.t1at or fm lan aNb4d2s tlc atie 116, i, tk dbee ol ebdiv i@i*s ttc 

t@diw tn grcup dt n dininklgs 6 A.oup tue irtuê!, M that lae. Emups w htr 

obl. to @t in their cohtun lnees tlw Mall otus."

In rha! .&, if Mmy is 9l n€., E$u'c MDld be div'n'd inl'o Egulatio and 

adDinidnlion. al exp€ne to pmduclio, sn! it rould 6uh in comprdtiv'lv lllger Poni6 or 

cDP going .o lal}lB .nd gov.ment 

olsn (1965) cxplotrd rn tsomi6 of lh. pFid@lio orpublic gdis lik' deGns law ond 

oile. lG nthsidlhlt govemcnl is bcs pois€d ro ptodre Fblic 

goodE ho*es ld8' 

privale gFdps qn al$ Dovid€ public g@ds ap€n nlm Sovcmmc ruits the nmbeN 

some other mys. I lowsver, olen ( I965) lndiodcs .hat 

'\hiush shal! sturps cn et b funlv igb iderest nth nore edilt than leEe otus tLt' 

will bhd to dcwu @ ftv reewt to P sotklattin ol icn 'Mon idercnt atd ttd 

tlep is d suprisins tcd&Nr fu tt* lsw n nbe! ol aht snall w'P to ewloit tlE sEd'r 

menbts b! nokihs them b.at o ,litPnportiomte lhate of tht bunieh olory etu"p etjo^ 

olson (20C$) sl doth.r plse, puls $€ bltmc of Doeertv ed econonic p€ omM to ni* 

gowmm or exprcprirlion, ad lan6 ndl2ttustutuits sNn"Ett" @'inB pnpenv 

nch6 rd suunteins imFnitl dloctu or@n@ll' 

P{dalory thsry rhar rccltds iBlilulio.s drcoted bv shic, wilh pulpoe of @ll@ling 

ndopolislic F s' ene poNertul *sndB ol siett in po'rtr ro infl&ne the star€ in 

exFrfriarion dd mins pFddorv Mb T|it psndion of Ent skinS tcliviti* bv Dow 

pt.yd of rhc sn!., suld ers lh. c EpE*N of 6en onnnsnts wilh hiShcr 

oppononily cost lo bargain od sk rents fom lhoe who hale los opponunitv oost Hcn@ 

si€ty s Esrc6 .E dit.lted liom pmd@lit lo Ed sting etivitics ledinB lo iftffici€nl 

EelE diriburio.nd dtc@ in w.lf.E (B.ml l99oi ld6 l98li D' t'ng dd 

shlcif.r l9l).Mptcd 16 rornaliz. iNilulions b!s.d m pE&bry dwv- Btudol {1990) 

et.boEl€s rfie imnrcl of pcdady indirtrlio$ on @ononic dlirni.s .nd Gserls thal rhc 

lll&alion ol elivitis by dtEpErcu6, bolh prcdrciiv. likc innovotions 6 wcll qs

unpodlcrive lik rcnl sldn8, would dcp.nd upon ficn rebdve pavofts For insr0nc rap6n 

h6 fcwr l.y6 $e oder, heM low resu@s dcvot d to Ml skioe ln dothcr sMt' D' 

l,f,s rnl Shl.ifs (199:r) nnding lh€ cvide@ of Fld'rorv itcirutids in lrx Dolioi's - 

rc8ld.d 6 q-Frpdalory - .$n $d d.e polici6 c kst tiadv in auteElic 

somftnt s @p.8t b'noFtut@Eric or i@hxt- dtDllcd' gomaxs 

4.2 Insdnrtions anil 9tclal TechaologQ 

Th. prcrious dis6sion ontlines l*o scts oi ins rulioft This Fsrch sludv de6n€s 

'nd 

.hbo6Ls empiri@lly bow th* l*o kinls of in$nuions mtten, Accodinglv, insliluions 

!d s8r.sEl€d inlo two tujd gNps nmclv Rhk rcd$iDs in liiulios md Antidnl sl(ine 

iNriMioN. fn rhG idy, am iNitdio,tiiEn widl tehmlosks'is u*d to deerib' 

inritutimr Th. llm '*id bcbelosiei e $@ NnlB d p'Dgm ol @ipc lhlt 

3tcruE hme iDM.ion ond t€h.vior wilh *h ortF c sll 6 b 'nvimn@nt I' sh'p's 

fi. ddisid na*ing praess (Ndh .nd W.llb 199'l; Bdop 1996 md D'v tnd w'll" 

1987). 'ftis w6 lal€r romlizn by Nehon rd Smpd (2001) ihal *tEn tne$ rcutind e 

inposd on wi.lies lhbueh fodql or infomtl mngetnr like laws or noms' th'y e 

nadc \h. ru|es oI ttq aMe .hen@ in*itutionalizsl Nehon (2007) points oDt 

''So.i.!tes d.oly tw a d.so. oI codrcl o|e/ iBtittttos liL the hml strutw of lrys 

ddJbttul o'stuiotul &tiss atd &tigtu d aalnr treldiotdtDa." 

P.lit(d {2ml) disinglisftB si.l tahmlos/ .!i iditurim in sinila tms a "umdi*r 

: , €ipe ofdtcdnes, .nd "zr.s{diaB l tu16 of o|I:n6 so in L.gu.gp 

oa Pclitfl, lditunbnaliz.d sid ach@lolJ/ @ Inc ruL morin

lmp!.t of institutio.s on qelfN€ is ph.nom.nsl SMe institutions low6 lrtnection cosq 

whdcs olhe6 Bisc lll€ l@s&tion cdr lhmush ftiins 6l o' oblninins inlomltion bt 

iop€diig no* of inlbmtlion. 

Nonh and Thoms 0971) a4E lh.t emci.nr insriturions pomdits in@valid dd 

'uding 

rcnr sLirs o0Doftrnks e rlE tcv lo @ooic 8s*r[ Flspcntv Thev tunlcr s8!c 

'id 

!bo$ th. mnMitg innitudos.nfoFiis pmp.ny q !6 

''ptupetr ritl* m rksic wUit snAt hec@: (l) otue a M cftid et oJ PnPnv 

rlihls i! dirowft.l th. na'siful @! olcoryins it i! lov knqoed 

to iE ne oJaiwtritg 

and de|elopins jt): (2) it is prohibithelf dPniv b Yevd otlEr Polni'd juti!'li'tioa Itun 

cdulotins a ture erftiltt kt oI Notet, tlgh} rcsadles of nhdLs th'r o rihrttd to 

tun .dtrction, (3) ad ftarU, ttg ftLa 4 4 tut of ptuP'ttv tishts li*e att itt'd i\ rcn' 

.lrd - ve cn ull @w th. w ,!.a and th. tt@, ottlc klea i! Nt 'tihinisle'| " 

H@@, bdlue ii's a Dublic good theE li$ ris 10 cxt nulrlv od Foltld 

of ns rid''rq 

$ ficd nighr b. udqin8snar. On ! slisrldy ditrmt norc' Hall tnd ,06 (1999) dPlli' 

inninnio6 s o sial mhl lsoinst diYdioB in lh. roltowing *uds: 

-S!.k! @drcl of di@Bion h4 tvo beellB F'tt t" d tucietv lce oJ di@aim pm64ttr' 

unitr atu tuvar.led by th. Itll Moutt! oltheh ptudwtiq ad vlPft lPre is di|cBiDni an th' 

other hahn, 1 @tt like . td on outpt. Secohd, vlEre srt.l .ot tul bJ.live8ion it ett'tt|e 

lnd idul uit: d., bt Eed to itust EeMt 1n Niding diw'sion 14 tu'tv @s whl 

@tul b nth .lga!.t t]@ prtva Nt&Ee. S@isl @tul rt 6 a ttueot oJ Pwkt'ffid 

vhich ilt Il is jee ad ttc otny dw$ Eguired @ t'te reert .t b na,. thit lhta

4.i In$iat ons and weuare 

Som€ Theoretical conlributioN on the jnpact ol idrituio6 o' w'lie are dieBs€d as 

s.hEs rnd s.olchmd (1943) tlcd d€ onsin ol crimc !'d ro'd lhtr il't nol dogqM nG 

any link found for mo6l ch0@te6 ll is endoscnously &lenin€d bv enforccdenl n€nnercN 

of lhe siety. Weinlrsl (1995) nana&s thc [isroricol !@unh ol institotionll cht'se and 

clrins $al f.dcnlism, s elr Sovem s'st m wirh lcs cht@ of conrislio' pl'ved m 

imp.esiv. Fl. in lic l.t)tMic sro{h of linsldd od unn'd sElB in lgb end 2dt 

mtun6 Mutpty, Shlcif.. Dd vistnv (l99t) shorcd $!t Oocupaliotl choie besq 

innovalive sl$ and pEdalory slm would dcp.nd upo{' then EbIv' Elum to Llent 

ln counlri€s rheft cnl skins hls 0 highet Eward tbr rlldl like in l'w secton" in$nudons 

*ould gr.w lq$ s @mpaEd lo ou.d.s Nwttding hish in in@v'live scl6s like 

€ngitrsins A ndi|' slldv trdNtci bv A@oslu (1995) prcv's llilt Enlsr'ng 

acliv'li6 @1. a n.8clive extemlitv on poducliv. a'livitiB nen@ oscn6 Ehriv' eward 

srwlua is endog.noully d:iemined bv ent s*king. o6ing duhiplc equilibnuns cnd 

cdld l€1 rhe .oonony lmp in low t.v.l $d!v sllre equilibium ln dn intcEsling sudv' 

cmsd and Kim ( | 996) b.sl d id€. hFill g.lml €quilibrim nod'L wilh I Ftd'tor 

dd ! pEy dreri.t ancdFEr.d inniniiN in sbldad grewdr nbd'l Eeh dvntsrv hd a 

choie ro allMt inhcnbi w€.lth in onsMPrioi Pdrdoi 

or &fcne dd ofq@- 

hodncriv. alldttion would l*d 10 morc wc0llh bur woul4 !r th' sn' iimc inoc'e rhe risk 

of confislion of,@hh by !tdalo6- Th. choic. of O.v would b. b.ed upon ih' pEdotors 

o|l|lar @hi, tf n is mall€r $a rh. pFy, thcn pEv chl)l]s produclio sd dcter prdarid 

H@@, wlth ndislribotio la(6 pl.e owni@ c D|Edalq 6 pct llsncs 0F risr 

of d!.otridion inoE6os b l€$lR tlldrion in dcfon@ Odin., tll ln' walt" Nonld b'

3p.!t i..hb FrFd. til4 Lmpor.l.f*l would t siFildrd Dc, dld diinF 10 tllo"ic 

vahl lo d.Ge da lh@slt lhct pbFnv h *N ed hetr' Pefcnhlt 

'|oducli@ 

Thi3 

wy, d!.y @hubL 6pit l n@ lldlv tid th'ir FqiN eo'iiti@ M{p' B@k dd 

YMg (1989) GXdG lh. Pd.nli.l of sll oi$tiad ml *t'14 rMp6 lo 

'xtloit poodv_ 

org6iz.d gdF by innminS itnli@l rfi. fiol4i lobbvin! Foliricrl p'ni6 Elpotd lo 

sEn Gtrois imring ic Etttiw b.*liL Th. @lt wld b' dlr ||.!' slsl' cmnv b'ing 

ep&Ed in dtnductirc lo6brin! Etiviti6 !rcbv cFling r doM' bl'rd hok ln 

doilE atel|gdi.l rdv, Brnol 091) 'ss15 tur dftpFrtu6 @uld iFdg 

Bhtrotosj6.dodia inNdion Dd atbl. s6LiMbk ltofih HNEi' tv sclift 

l.nd to nis.lto|. lil. Gid n rgd od .quilills d h*ul lht @ld inctle d'n 

pofits wilhod bcing FtdEliw tlGM itii idl mnlFE 'l6irg lh' inemiv' 

3t!El!F i! 'E d.d fd b.ld tnilizrf,S 6tE aMil @|16 At dFds pl&'' Brunol 

(1990) Doinb on filr dly ttd fm3 wiF lltrl t|rc infmtldl ttvnn'li6 (ffi dFn 

@D.riro6 lnd rhc fim' choh. b.rr6 l. httologltl ind'riotu' ml cting ed 

o4!nia{t cdn. *dld d.p.nd opo. ltt ELri* g|iE fim l|r* lsvnn'rd6 SiMg 

iNliludm ddgs d. inlddliol ..tdttt* 600 dn s'ddns !r

olsn ( l9l) c€tcd d nodel snowins thlt dv lom of sdvmr 

is bctLr d& intrchv He 

'' Under atufttu, a@tditu .1 conPctniQ tfuIt bv tori's bsdib dttnals the irctntE to 

itun und lwtl@, ledins littl. ld eitt@ the pDpul'akn ol the bddits Both cd be bet'r 

of da hun llt eB hiAel.f uP 6 o dict4hr d tt\tionutv badit vlq notutntEes ahd 

dionatiEs th.l in tte Jom oJtda 

tn d.l de, h. @uld botfit fion l|E lhll in.lt& in pnp"tion ro inclls in F$ductunt- 

.@ irt his in|e!61ro pDrid. Flblh scis lhd intlwE gslb bln if h' lets h' is lilelv 

10 bc s!4Esd by odicl\ lh€n he mfislls lhoe 6ell dEl ltlue m@ $tn th'ir cxDet€d 

Enb dal hc could collccl 

An int.rcning etudy b, Acmoglu.nd vc(li'r, (199s) points or lhot there s cost of 

enfot.mnl. tn p.{4l .nfo@.nq lh. con! out't'id lh' b'neiq heme il mtv b' oplintl 

to harc o i ed.die tevel of $foFd.nt .nd lllowing cm mption S@i€lv f@ a 

l,l{t{tr b.twn i.Bitrg in PDduclion d Fgulllio Hor€€' th'E ould bt @ ee 

lumt *h.E n h psdbL 16 simul|lFslt tEdw @piion bv in(jile in public stor p6v' 

inc@$ inv.ttidt in priai€ slor bv n ing it nm ptofttblc od als idpbrc tlE 

allmoion ofloldnt, This could b. s belue, beu.r.x lnL pmpenv dsn$ though high plvs 

in publi. scior, wdl{t kad lo highs pD,irbilitv ed invdtnenl in pnvaE sctn dcvcloping 

.b.ot rll*.rio of thtn oa Fivst stor in poductiw *tiviti6 Horctr, d inlltBrmg 

pi.tuE dis whcn plr Lwl of pDFny riShls d.l.fiiE rhe P'enr krcl of pr'ddiviri's' 

thlr in llm dd.mirc $€ tutue tercl of poPnv nghs. Inn vould Dtlc inni'l low prqpedy 

;shls @mld€s tbll i. low Dop€ry righl_low invedoe.t l6p' s initi'l low l'vel of 

'hen 

popedy isl nlkd them utFbdtrcliv. Prc&nllv s tlev inv6l le$ in hun$ sFitll' theE 

w6uld b4 l.sr !(enial 

h€rclirs lnm tuluc impovenenrs in pop.rtv riglix rcsulling in

voring oul rho$ autur€ ifipov.mcnrs Ru$lGnrlv, d.v.loping counlries Dav ott for le$ 

4. 4 h s.Itutioi al he.t qoc la I tec hnologle s 

In rnis srudy, rhe s.r ofeco.omicdllv emcient iNrilutions ilncd innet of iBtitotiotuloed 

seial techtulosk: is ditid.d into No bEnds &cordins to lhe ttv thev inprct goMn 

hasd on rhe tlKr.ricrl onlibuiion ofNonh (1981) llE ti6i i5 bv rcducing rhk ofdoing 

bNircs thus pEv.mine divcFion ol rcsu@s, ud ih. $0ond is by pEvenling piedllory €or 

sking octivities, rheEby div€ninB @N. low.d iMourio s th' b$in'ss wiu not ned 

lo i'r€c Esu^G in potetjng then proFnv irnB q @ing D"d'lory 

rext el'bodres $.* t*o bd& of innnutids: 

4.4.1 RlsL reducldg tcchnologl4 

rcnts Th' lolloving 

Ttc fid cmFoNm in inlcx ol i.{iluliouli2.d @i.l lchnoloci'3 ir Risl-Edsins 

bhnolosiG. lrcs$d nsk olcxpDptution dd @nfistio ofprcFdv iet'b *ould FUs 

div6io of l€scs lion p(rl$riv. etiviiB ro p.ivd. mnscMt in FoteliDg ft'n 

dst s dBl m b€ tvoid.d by Ddp.rly innjiulimlizing Rid Ed@i.g sill |echnologiG ln 

othd word, by inslndimlizing Rist-Eduoing sid L.hnolosi6 dds not m@ @U@'iverv 

hiri.g gulrdr by sNiety pd6lo b. ch.ap.t, il mthet nds thal no Buords e Equired in 

rh. li6l phce- tndex ol is* r.duci.g rah.ol4i.s cov.6 rho insrilurions p.naininB lo 

proFtt rights, low lnd otdet, ond polioy stability, lmponot onrnbo.ioN in .his @ a€ bv 

could lnd Crubo i1996); cozi (2001)iOkon (1965,1993, lr82)i Baumol (1990I Noith 

(1990)i GEii.nd (andel (199t) and W.ingsl (199t) l'or lh@Ftial mod€k of w@l rkk 

educinsinsdnnions,sF(M!Ohy,ShleifcrondVhhny,l99liSchogandScorohoe.,l99rl 

Aemostu, 1995i l,junsqlindd $rgenr,l995ilid Cmsmo ond Ki6, 1996) Studies srcb

s iMrgc, 

B@L lnd Yong; 1939i dd Murphv Shleilcr and vishn, l99l) cxplai' funnd 

h@ in dar@c o.rtrls !trel Cfrlh. 

4.42 Antl-Rent 4c&lng TechDolodes 

Baumol (1990) poinb or tnal inromlion asvmnetry thmgh Ent sehing or otganrdd 

cride h cub.d lhough srmg inslinrtioie$ onlv vane hn rd comp€thion ind donidne 

k lh@gh inmvdion, H.M in lh€ sninB of .lterivc qro|mol th'e 6vmmelri6 will 

led b inmstid 6 thc only tde leR lo 6h i.fodliM 6ls 

Tne ssn4 od p€dupd noE inpori0ni dirdsid of lnslituliNlianl sitl t@hnolog/ is 

Anti Rcnt sking s@isl lehnology As shown dli.r. lhe Fnl_sking (b'havior) n dern€d 

as llp @i\ll! b!1, pvsd oJ 

"eal,\m^tfcts 

lr'o itun r99n Hoce irscoisoqEnc6o' 

smicit @ m8!liv. as ! rdt sker bercfiB .r rnc qp€ns 'r dhn This in conlrul io 

''redig &ttwtion wn@ imvotion 1..d5 lo ouldirc dnte' Ent ckins dircns 

enfrt{furhl .fiilts ci{t ,wutg ftom imEe i' ptstudiviq thDush i'mhlio io 

unpoducli!. pttdltory &liviti€s bt ihri ng or oihd p@pL\ EsuBs 6 *cll as protcrion 

againsl diveBion aid exprop.ialion Thk is amed as '&'/u'rs cEa'i"r' bt Mehlun er 

.1. (2ool). A va$ litehruE co b. food linlirg.nr.PEncushio renl $eking od growlh 

(Murphy, Shleifddd Vistmv. l99l; BlMol, 1990 1993; acemoelu, t995; Accmoglu a'd 

v.rdid, lt98 ). RdG 6 b. diYid.d into lh. i.sribtiotr mti *hich @v'r iGrituliot 

rLred b egul!(ory qrtlity, omFion, dd @ ol doing b6ircs.-llE rcle orso!'nmdl 

Esul{ion has .ho gd mflidins vi.q somc vi.w Ecua{im 6 a h'lpin3 hind (Pieou 

l9l8). olhor viws are bas€d on politiul @nomica .dveali.g lhel Enl'see*er i' 

Covcmm. wold mould thes reeul.tions in lh€ir favN., €xl@ting €nb (Shleife' md

This chapre uaets lhe li&6nE delin s .xphins sd buil{b upon ditre€nr thdriB o 

incitirions. Speifi€lly, ir hG @cEd in &t il, d. r chsiql rtErv o' slore bv Ddghs 

Ndth !s h€ dificmtitts bclv@ ero"'th .nhdci.s dir'clins imlinni@ besed o cmhcr 

tl@ry od ere*rn dNins Drtdalcy lh.ory i61nutions 'rled 

ro exF&l mon@l'sric rcnls 

wirh lh. oim lo neimia dlers inooft Tli3 fisry lills in ih€ slp leri in reo cltssisl world 

ofro tru@tion cost and costless snforc.ibililv of poFrtv tights' Ho*ever, ne ii{'sr 

phenondon in ne* cl!$iorl $h@l is ued hcrc b exphin nabilitv in spit' of a huge 

l.ndemy ol Mnmic &slobilizotion !i.r a@lnlins ranecri'n 6sts l lle colets lhe 

subs.q* mntibulios modc lollowins thk rhco.v 

In rhis chrpi&, liieEn4 evi.s of the lh4li.d onEihrim of insrcliss it u.d€dlm, 

th.r e lmdiz€d inio two di$Ec gDuF b6!.d o reb$ic2r rhdv or sr@ Fidllt 

rh@rqial mlrihniN Ehld io hos lhcy imP.ct soMh !d *lf!F rc nvidrcd This 

Eeiew $ll 'ot dly pmvidc u ldcF|lndins oa now i.sti0lios m vie*.d in dnmic 

mod.lE bur rle how tn y inpaa gowlh. -lh. th@dic.l wo* ms to be *€ll d.v.loFd 

lnd €lohomtive; alhou8h lherc nill .fr sips d.mpniol nont thal is b.ing deall wirh in lh'

chapter 5l EDplrtc.l Shdles on Grcwth aDd lnsdtudobs 

h rhis chsd !F @&lF silt di4 ltE liElle d rur'iMbL {mnt Swlh tid 

i6il!rid5, dxl tilt @ vriN edi6 ud.drtd dlid in dt dBr ofdtEhFd "d 16 

d.wloccd Mlri6 tpeifi..lly P.lddo '|riG licnt@ pius tbd'ls 16 $sidu' 

6Imi. geln &nlltsti4 dE.ftds oa iNilutiN d SoMn 

ofdischlD(6 b s folb*5 

of @tui6 Or8.nizrid 

S.dis t, | $rvc,s dpiriol 8D$h sod.k fi'nin! is din .rl'ih|l.s' s'dln 52 b &roLd b 

$drs @iGr.d io dtuielly !s dt {lidirv ol@ chsirl 6va!.ttc" tdkn t l lc6 

s d. imF.r ofdiff@d tlT6 oai'tinuis d goMh s.ah.5.4 .s$s i'di im g!*lh 

link in &rchpins cMlti5 !d Dd(ird !d fEllv, srin 5.5 dFlud.s lhb di5.6i{h' 

5.1. GrowdtAtrlbubs 

At n lm .hbo.|raw dEdlli€l mod.L cnpirt l |nqlN lnribrB hiSh kwl ofSD{h lo 

Dnyliql od i.an{eoE inv.$rdr (Dclts.nd Sumnds' t9!} Bldttoo '{ 3l' 

1996), MEE oa limid 3r3.m rnd *sluG (King od L.virc | 991.'U. l'husr & KuBLr 

198: Bar .r !1. 2oooi tthirs-8,-Kunl .ttd L.vi* 2001), t d. oFlnd (Doll.r 1992i 

A.n-Dnvid | 993: S-hs & Wftr | 995i Edw.di | 98) 

sntdy cei.d dr 6y D6Lon8 .rd sMnc6 ( 19 | ), c@nns dE poiod ol | 961!85, din.r6 

rhlr . FrE rlgc aNtle irnstuiw.nd mc$Ery lquiDn.t inc0ndl wld k d io 

ft tlard D@.drsp ftlcg$ in gFwlh. lt rl$ turde dE sitl dun o 3Eh invlsal in 

.bdt 3('4 in rcll aucriding nd... Blontu ct rl, 096) m..b ! simih. ctr {t ci.8

shcs ol fix€d opit l a@alion b GDP 6 t oDxv rd inrerftnr ro tc@ lor ils ousl 

i6pst on src*4h, covsi.g noE dan 100 dniri6 foi dE Ddiod of 1965 10 1935' found 

noE €vid.nc€ ofsrofih causing inv.slDenr' dther thM olhsris llowevd high Blcs or 

fixel calibt lomorid l@ fdnd b Mp.nv 6pid go*1h in Fr opit! 'n@c 

Assina iE inp.cl of fi|@id dc*lopMl d gd$'dr is rctly Es@h€d a 

corpEhensivs cm$sottt sludv bv Kins dd hvine (1993a) on cishtv counlries @ldinB 

lhe peiiod of 1960_89, louftt a posniv€ i6t,ot of vlrious notrEs 6f findcial slrucoE ond 

d.rclopmdt o pr*nl rnd tu1ur dlcs of domic gio}(ll capiltl !@umutttion lnd 

cr*idcy. Al anod.r pb.., Kins anl lainc 

( l99lb) explo€d lhat inp!'t of lindial seld 

or so\rh is th@8h inctls in innovdion leriiins to itcrl@ in Foductiritv B'tlo 

ii@cirl syiens incFose lhe ote of innovdio' ciBina ecel'ded 

N.use. & Kugler (1998) foud dF sihil.r conclusion on OF D c'unries Bced on tme 

sric. eDslhy dalysii E@kd $al aMci.l sanor tnd cDP ft @'nt'8Dtcd ed dhihit 

gdss 6Flily. In ! cD$ 6DnFt @at ov'r dE pqiod t 960'9t' B€t ei !l {20m) als 

ld.d a posirivc crusd linl berw*n fiMcial &velopnent tnd gbMh ad pmdrclivirv 

capilal tccunuhiion ud sving Eres Demng dc _Kun! ud lainc (2001) exlmine fin!'€ 

go*,rh ndh 6ing high dennnion liMncitl d!r.r o"bout 150 coDttiss covcring a|6 such 

s sizc effici.rcy, .nd slivily of bonis, in$|i@ @p6nies, p'Nion tid munDl funds' 

fiN@ @mponi.s' lnd tbk dd bond dl*cb, lound p'sniv' linl in tltis Eeatds' h ale thar 

aound i!$il,lions ol Fop€ny dBhB otd conlrod .nfor@mtnr '€ 

in$rumenl,l in fimncial 

or a ditreMt &con! B€n-David ( l99l) links |ndc libaridio dd goelh swrgeG n 

*kcGd ounlri6. ln . simild $idv bv sachs .nd wmer i1995) @t'rins 135 oDtie: for 

de p€nod of I97l) ro 39, lound slons.vid€ne ofonverBeN in @nomics und€nttins 

darkel r€roms like lBdc od nmncirl lib.nlialion oli { sinilar leounl EdMrds (1993)

covenns 93 @ri6 enployina nine irdi@s 

go*1h, comludiry tnlt TfP go*rh is f$to. in 

5.2. Institutions an I Neo-Clostkal convergence 

of rEd€, adnd n b b€ infrMdbl in TFP 

N€ cl,sial ln.ory pddicts convergence ol pd olpira srcwlh of cotr'ties nlkins 

ddvelopina coubics me or plr wnh devclop€d counlrics ov$ tim€ However' lack of 

cvid€ne for convssetce s@s lo wsken dis lh.ory o' ohpi'ial sounds 

(Pe@n cl rr' 

l96q Romer 1994), and develoFd @unlri.s conintr. to sow f6rer Oe ft'n stddv sl!|e 

gb*h Bt 6 poposd by ndl6i4l thdi6 ln ptnicular, Rdq (199'l) sho{s 

flpiriolly rht. sbnd.rd pniuclid frrmtio k irc'Iddw fa qpltining podudivilv in N 

@mty sniDgs dw 1o $illovd effei oa tiowlcdgc iiom t!.sfd of tehnoLoAic! ltis 

s€paEt .tr€cl is mr MnEn in poducio turctio mdins bid plducritirv 6limd6' 

Hde tft* is rc sdpporr for unsnditiorl 6ec4p@ Horcs' omv @nm'$ 

belirc rh.i this @v.4pd i3 condilioml upon lh. qEftv of iinituid3 The idiorids 

sh'p€ rh€ inmwii€ *tivnies in thc eoomy snd sF.d up lehnologJ/ odoptioD- lnslituli@l 

Nea}*ss i. fom of Bov.mcnl inl€d.ntjo, @Nprid, !.d unl'oret d popdv dgl'6 in 

d€v.loping outies 6 b€ alttibur.d |o low l.v.l of oov.i*pne (Shieifer 4 al l93! 

Rodrick I 99s; Acemoglu 2002; Ac.no! |U .l a l. 2000, 20tt4 2002bi Djankov €t !1 2002 md 

2003: B.m 199?), tn ptnicul.r, did.nce polid.d by Rodrick (1993) suppotu this 

hypoln*is, 6 6!.di.s havins hish in.qolity, dhnic fmsn.nLtion, weak govemanc. 

in*innions like rDl. ol law, citians' righlr, cxp.ricne ! shla drcp in lh€i gro*lh Eles anst 

1975. A@oslD (2002) lle onributd fi. look ofonv€r8€n@ lo rent €xltdcring instil{hons 

dd inefficidt polici€s sding inEEsb of powq bok.^. ln o similar @ntxr, A*moglu el 

rl. (2002a) emphosiB thal tlchmlogicll adoplid rnd indilulioal d*lopn.nl m bc

c.v.dlly lll@ted by pohicd elites .s il would csdc lhcir E €xnacins potentiil dnd fdr 

rcd&denr Howver, lhen efisl roDld bc ftducing in hiSh polaliql comp€lition' 

Shl€ifq et.l. (198)dilicted the'hehins htndi.nd invisibl' hsd" n$ cldsioln'd'ls 

md Eli'ld Nonh's sla@ ol 3Ebbing hltd' th.E lddsis is on rhc Dolitical aooov ol 

$c sr.c. tl is rl€ Polihel .8dts p.|i@l int.r.3s tld deviab tlE @@t fEm 

mdisi2rrim of $ial relhE. Eopiri{t su!'on lor @nv.rgeG *s dpruEd b, Bm 

(l9r?) in his sruil, of IOO @ntties fn lh. P.tiod of 196&90. Hower' rhis onvcB4* is 

fou l ro b€ mndiliMl up.n fioto6 such !s i.ilirl shdlin& life expet!rcv, dle of lto' 

r.mr of tsde, lwe. inaadon. Horevcr, polirisl tighls obsew€d 16 depicl a non lin@r 

Eladonship rtducing sroMh at boln low€r aid hiSlEr Lvek Kn&k ond Kefd (1995) 6ho 

supF.r popdy nshts inn dids irslrumcntil i! gdrth- lh.v 'l$ 't'sRe rhar inclusion of 

lopelry 

ri8hrs als incl$ fi. Ele of@nve4.M 

5.3 tnsh,utlons aNt E@omtc Growth 

Empi.ic.l litmruE hd idcntified veious inntu oB innuefting ononic gowth sohc of 

rh€e include sovelmc., hw €nforc.B.nq justacc, relutationi tlx addinislfttion a'd 

in$irotions mo.ging the 6onc10ry lnd fis.l Flioict 

(solo l98q 2000; r$ok lnd Kercr 

l99t; Morc I95i Sachs dd warcr l99J; Fry. ond StLifd l99?i ,oh.son €t .1 1998; 

Ecrdly ud L.virc 2002; K,ufmM ed l(tuy 2002; Rod.iL :997; Rdlrik at !1. 2002; Ms 

.nd s.tlx 20ol; Ko6no. d !1. 2mti ,.lili.n .l !1. (2mn) ln Fniqrlr, Aamoelu d !l 

(2002, 2mt; Aemoelu (2000) slDs dc idpd o sbMn is mE Fsdnc.d in log M 

Ma@ ..d wcill (2006); Ols .1 .1. ( 198) lind .vid@ sussciing rhat instinnionll n b 

.rc nbngly Elai€d !o lobl fetor plduclivity. TlFy clcely.Inibit hieher plducrivitt in 

counlries wirh h.r idid.idal qudlitt,

With €!!rd lo cauel ef€t b€|{en innnulions and @nmic p€rfomt'ce sttrdics ljke 

olsn.r rl, (l99sl A.dodu, tohns, od RobiM i2ooo)i Roarik 't il (2002) indiclre 

fi€ clelr eviden@ ot uni4li€clidal oNl'lv in te diErid or inslitur'ons imD&lins sbrln' 

sm.3rudies tike world Bdl i2ool)i Knkdnck, Psrter, & zhang i2006) 

inv€stigled lhe 

role of inslihnioG in pomoline invdrMr dd opital cdtio romd @mFtling 'vidcre in 

rhis rcgad. olh.r dudi6 Eircmt d inslihrtioml Dles in inpoving inamlrional oaPnd nows 

in paniult FDI (Rcie tnd D. Sob 2mli Smarzv6t' ed Wei 2om) od B$folio 

inveshcnl G€lc and Wdi (2002). The Esetruher will so thoush difiercnl stndi6 th8l hlve 

ban undentr€n lo li'rl llt inrhliml felm innwinS ttE grrMh gm\lh' A bd'f 

a@/nl of some of the ibove mendoned studies is Siven b€lo* 

Soro (1989) finds rhd dgrrhlory.d lesal b"ieu in Pcnr led ro ino@s in i'lbmal 

acdviri.s. naling bolh fomal dd infomal sr6 *@ on l-om'l slor wcE inpoed on 

a disrrsFnionare highs hlrden of t Ydiotl Mile in'omll elod l&' isl or 'xDntrialrd 

du to Inih d m Dolclion of prcFnv n8hl ttul @@t 'nll)'m'n! Ar sitrs Dl@ soro 

(2000) nade & inioF3l iog noG rha! in ib$tu' of w€t l 'Lfi ncd $d enforced prcp' v ighls' 

rhc infomally dtsl ssts (withour PoFrtv risl'b) m'or b' usd lo 8crcde dpiul md 

rhis is the main caus or.hd Dndc;d.velopnenl of the Door Ior jnsbc€' he d4ues lbtt p@1s 

wlrh in Flad h rhDr 55liM L'gs rh'n tll $' foEign dimt inBtmdr md' in lh€ 

country, including building of rh. Sud CMal. D€spird such a h!g' wld\ rhcv ltck anv 

almg.mcnl that ould rum rh€s Itfomal ssas into liquid capiltl ln dothet sudt Maum 

(1995) cmployins cN @otv, subjdtiv. indj6 of cmpdotl bu@umric dd judi'iol 

erEicroies, politicll sLbility, found omptid i.hibiting invesrmdl sd dec@sing gol1h 

Fryc od Shteifs ( | 99n in ' micb level sudq of | 05 shoP o*ffi in M@ dd WNw' 

obecd . lover qulily of insritutions ledii8 to pri$te Dot@lion! 

r'gulaiorv bunkn dd 

mplion in Mlsw {gg6ling rhe drw! ol gabbing hlnd , bdrer ft 1his dtmv To

@Nsl inro invisible h!d'. imde in the qulitv of go@rc in Ntrrij ln adns 

sludy, Johnen er al (199s) tnempted lo fitrd &clos responsible ror inc@ in unoffcill 

e@my, d suggeled thd n is nd drc lo highcr buden otl'ts fr Esuldion s con''hEd 

o be the csse bul du. lo mtuprion aftj bib€s nsing o oi hiehs dcg@ of rcguhory 

disrsion lnd wtq rulc of lt*- On t difl'Enl mlf1 Easl6lv tnd r'vi'c (2002) lmvdl th3l 

eve.lhe imp&rs oi lropics, sedt od ctups on inoomc tE innlcn*d bv |h' qulitv of 

insrfturions. A @p|lh€Nirc sudt bv Ktufmdn od (@v (2002) assbline 'wdrd 

eovcdnoc indicaloa i li.cs of l?5 counlri's for lhe n'riod 

or 200+Ol fomd a song 

pGitiv. oftlarion b

in 62 @dln.s dploying six sov€n'M indislo.t sl'Ns rhar h€iler in{ilulios imPole 

€fficidcy. Atrdtls hirc also h€n m.de ro lss rhc impad or ididios of intcatn'nr 

l ows. tn p.niculor Kn*p.fick Pa&€r, & Zh.ns (2006) show thar Egnhrorv qltl'tv 

posnivcly in llcnces fo@i8t diEcl inv.sune nt Reisei dnd De Solo (200 1 ) explotd th is etTect 

on privat c.pirol n o*s on p€ret dtt of 44 oountics ovs lhe pdiod of 1 936-9? rh ich shows 

rha! fodi$ diml 

'nv.shen! Donfolio e4!i1v invdtncn! bond flowr s *ll as shonftm 

dd lone-l€m bonk lendi.& p6itivcly ttret gnMh prcvid€d a $ud istitutioml b!e' 

c€lc ..d w.i (2002) obede lhat 'imdrioll tuMs inws t5Lntt{lt l's in 16 

lr.nst6Enl @ntn6. on lh€ olhs h.n4 h.din! dong tun& l€nds to b€ mm Fwd'nr 'n 

le$ ldspNrcnr 6utai€s. Th.re is ale sdc cvidonce Oat during cries, fun& fl'e non_ 

rMspldnl countri$ by a gEatei anount." 

In rne iouo*ins stionc rhe srudy Nill f@s on lh. two b.atds of iB!tulions lhdl wc ust in 

53.1 nlsk ReduciDg In$ltutioDs 

Th€ firsr componenr in our index 6f inslhutidoliz.d *id dhnologies h Risk Educing 

trslilulios. lrcEscd .isk of expbpriadon ud @nlislion of popcrtv richb *ould 6ue 

divdaon ol twu@s liqD prbdciit ditniG b pnuc ltmgenor in p@rin8 then 

righs rhd tr b€ lvoided by p@Frly indolidllints Risli EdNins sill lahmlo8i6. In 

other eords, innituimlizins Ri* Eduirs $i!l i.clmoloeics dd nor nan oll.ctivery 

hidng Surrds by s@iety, pov6 to bd cheapdr, h m!.N dat no cli.ds .re cquircd in te fi61 

Dtltc@t oDoenls of Rist Educing sid khmlogi€i p.lriculEly l'.opcny tighb 

plredot! c el}z.d dpiri€lly !d rh.ir imp..l of gD*fi i. eblish.d (Scully 1933;

Cfl.rh.r Hddb. .td L.*en 1999; KrnMr lnd Ev.ns 2001; B@tlk' dd Subrick 

2oo2), h Fnioul.r, otho studi6 Lit. o@i eml) .nribulod paLnl prct.'tio to 8rewlh dd 

in€qutir,, (soto 20oo; L. Po.is et al. 1197,198\, link pop'nv nShq invcth' dd 

fi@chl dgh|3 prcrdion 6 *cll c .nforcodt ot cdrels io ffneill dev'lofltenq 

ni!*'r dawroprunl' 

n.lins oompl.x fimi.l podrcr sh B Bonsls's 

'nd 'quiiv 

Ooh.s McMilbn rd wmdotr2oo2; M@ltv 1963;o'l&cr l98l sd Ellicls l99l) 

mniculely t.y cmphsis on judicill tvsrd, ed c@Lnd tntl if th. couns e sl@' 

iNll@i.'|t rhc! cmDl htmsl @ ft|cnfo@nt.p!o6 s ' slution lo cdn f ilu6 

SDaifsllt loro$, McMilLn. &d wooddtl (21D2) p|o*s ]6llv 'lTcriw pdpcttv 

nghb disogc n4 otdre !|d @mFtidon s *ll s diMlp dising pb)d in 

Einctnol oa th.n dinSs an pFfilrblc .va6 Sdr. !wdi6 lik' (Ols l9l; 

tindEgln dd P@h 1990:.td Al6it|1ozkr, Robini &d sMgd t992) feus m onodd 

ftt rldGing imrnudq ol poliliol 3r.bihv 6 shM |li!t lolitictl viol@ tff* lhc 

cl]r|Mic Frfdn.E. Soft of th. .bov. @rid.d $ii6 @ cl.nnd'd b'los' 

A s|ldy by S.ltly (l9ss) @tduct d @ I 15 c@di* @r dE pcliod ol 196G80, p66 

incinni{rl ngs6 *h B polhi.ll .td citil rib.ni..' ruh oa Ls, 'nd hlttd Fll|Mi:r 

pod@ . tus posiliw inF; 6 ..l)|Mic sFtdr .id .ff.imv tl6uc!' €xtibirins 

inclu$ in gNlll of lbod de lilM !d iBJq* in .ffici@v of iDod 2.5 litu, GwlmEv 

Holconbc.rd [.sg (199) d.v.loocd i.&x of inriludd @rco8 doMic' fisl ltd 

poliriol indituri@ to porc (ll,1d.ir ihp.d d e&mi. sre*lh as signifiqr ' Stdv bv 

Kdqs.td Evds (2OOl) dplicidy f@us.d d inslilulioB dfNing inlcll*rul poFrtv 

n8h 6 mdEd bt R&D irv.shdl ond plt nl poLclid\ in cs @uFv p.rc| sludv owr 

the Friod of l98l-90, found @mFlling.vidd@ th lhd inliiulios*us innoviti@. !t 

uorfid {udy, Bank .nd Subrict (2002) .lnhdc lon! run @Mic develoP'n.nl b

inrinnbE inpFvins ru|. ol llw Th. 6ults sugSlss i.sritriN $ch 6 pop'dv nghts 

poterio[s' r€d*ing lfu(nidv @uld ind@ 6dmic &EloDms|t 

simild celciotr @hed bv ti Pm er il ( 197) @vtnn8 49 dIdi€s shos thal 

''Cu,bies with p@rer imttot ptoEaio&. neMd b, tuh tlE 'h@ter 'f lead "t4 

od tb qutrity of td erlbtutu,n tua. stulLr dnd Mvt'apitat Mtzt! 

They hinh€r assn in Li Po*! dt at. (1998) poor t oFnv ridlL3 Protection 

dtte sh@holdes 

rilb smau holdings, insuE and ldd to 6en conFntdtion in lhe l!4psl public sccloa 

ln a 6m lcvel $n€y @nduci.d bv Johns, McMilld lnd woodrufi (2002) ol 

nofa.tunng slor in e3sM Euop€s counlti.s' found lt4c siz ol umllicitl slod The 

m.jd tE.lcs w hi8h lcrcs, @pljon of offioillt, 16 frirh in @ut$ !d infMal 

pmrdiorl' our of vnict @!lio b.i!g mod signifitrt, An itEEsinB histdic'l iudv bv 

on 

'nfm.l d€s sovenhg b.onb.y GM bv Ellic*$ 0 9D tsns dBr 

'@ tN alvays oPrute' k lc hatstu'd of @t @"Ikt siaania ttt pet*te 

'tu 

cbtuttt etg ttgir .nv@s otq dit 6 Mkat rs J'tun lav. b'M of at@ 

tMtidcNs, zrp@tolix, dddbr tt h .ti.t Nt tEoryorcka itu Io* 

'{nkt 

I'dEBtu ed pol€ O99O) e.lr2in! polilist tud aommic d'b iion l2l calties ovtr 

th€ p€riod 19501932, louDd d coup is folloN.d bt po|nicll insbbililv that mv lsd to 

eorhd coup. I! is lh. 6onic w.ll-b.ing $.t can &l.r I ln dorhr snjdy, Al*in4ozler, 

Roubini ed S{!8el (1992).mploying a enple of I 13 ounnies ov.f t}e p€riod of 1950_32 

foud lowq srcfth asiaLd with hili l.vcl of polnicil inslrbilitv 

"

5.3.2 R..a-r.eldn8 In.tltutlons 

Thc|! B t iLlnh ol lilc.ltur. linki.g E8ulatory qullilv of Doblic 

insl'turio3 lo 4oomio 

grc*rh (Chong .nd C!l&M 20m; S.nc 20Ol i Gngdhn ud Mtnin@ 2001 | Ditnkot g' al 

2Oo2; Rrjkmr r tSwtup2OO2;s LlnsdorlT2ool). crodpti@ is vcl tnorhcr fom of 

E.t stjns dat d b. delll bv prcFr instirutidll im'*ort vtg 'umbd ofetudi6 dom 

c@plio of 

on fiis rofic, in plniclle, w.i (1997,2ooot d 20006) sld thll ircEe 

'n 

!b@t m. sr.id.rd d.vidon lqld h..{uavtLnt lo 30% imde in |!c in lcms ot@ial 

inDr.r. Tui .trd D.v@di (l99n tinl @dPrio to .{6iw ind unpmducl'w p{blic 

inv.diar. lMing plhlic invBitrd Frductirilv sd qulitt This los of qu'lilv is mE 

prsdM in l*lhh @ ud.dG.tio.l sffGupu.!.l (2lDl). 

Pcd[c $. mlt imootul innibdoN e politicll idilulioN in tais of rh'ir 

"f€r on 

orhd insrimids, InsrnuriMl ralt6 k ds lo politi4l Enc lh.l @ b' culh'd thdgn 

cn*lt od t l'|E m polilic.l 4o$ K4acr (2004) &d Kdfd ..d Kdt (Z[2) Vriot 

$di6 hrw sho$cd 4id.@ tpoding lh.l pofiiql fitcdon.nd civil lih'ni" grsdv 

in[EG sD*th ltd *lftF (Kmadi .nd M.gulF 1985: Scullv 1988; McMilLa R'ug 

od Jonnsn l99l ), soft of rtE qrlibotid3 & H.ny d*ib.d b.b*. 

DjDrov d d- (2@2) .mplotii8 tgubtion of ort daL ol85 @unlri.s' f@nd th.l dn|.ies 

snh nirh l4i ol Esulttion lan b hisls ld.l of cmplid od hrEF uotrEitl 

A ,ody by s@ (2001) htSlliahs hc* ol o!6ishr bv polili€r .utluilid d .hcn 

b{@c61ic .gpnEi cd!6 th. clTcliv€F$ of 8o@h.ni 

3pcrdins Tlcs alc.rs d$ 

Equic ! Lrsp bdspl to povid. public goodr du.lo $cn immci.rcics. This will i. nth 

FnE srwlh. OnSono od M.niid (2{DI) .n n@ lo liid ! li.* hav*. quililv of

les.l dd Esulrlory iNr dios ! l andustial gro$h d 2T lhwlopi'8 @unrics dd fdnd 

sigDifi@r evn crc. in rhis es.tn as inc|!.g inwsrnal Dd bLl f&in pmdutivhv- 

RajlM ed Sf,a@p (2002) t(cmplcd lo 6.d if lh. ditr'dF in emcev oi DDblic 

srdldins d. be qpl.inej by instilutioal qualilv. Thrv found siEns 'vide'€' 'speialt in 

public h€lltr dd Dtirory.duqlion sp.nding,6 n bwea child norillitv dd i'ctles ute 

€ffelivere$ of pim.ry educdion in cornlrics qnh sko'g inslildlions Wei(1997)aldo$et 

pl@ claids $ot coduptiot inoreaes u.etuinlv mosred doush indunrial suw€v in FDI' 

'tn ircre@ in th. uftelaidf lewlftm tun D.lsinsapoe to tl oJtlerin d tk Nruge 

kwt oJ.@ption in th. {D'Ire nilins tle @ ^te M n tituknal tffi t'r 32 perctdage 

Wei (2000b), m$cr plaa jndicats omltid ldv@lv aaf@ing dpiral flo* Howddr' 

ns erer is disoned by gorcnm.nt Endcdonti@nliws in FDI E*n lis @ntulline rhe 

fdors @ffcidr of adptid EmaiB hl3E, nc8dve tnd sigDifid Ho*wq' hd 

cm!i6 chfl6 of 8.ding t€n* lon is nd litk d uilh clnptid 'nd @dpr dih6 iend 

b stip $€n ponion ofopil'l ll@s fioo I'Dl b &nk lom mking idpacr of@dplion on 

dpilll llows insiSnifi@t. Th. sinilar mtulusion eehcd bv Wei (2000a) mve'in8 45 

cdmtns ovs the pdiod of 1990'91 ,nd smrdyns*! ud W.i (2000) dploving fim level 

d.ta, prcv€d comttion 'lory *irh highc! ux.l rcduFs FDI 

Gnph d ol. (2001) linds low.r coruprion is !l$ $soeitred wi$ hi8hd. lcvcl of hum& caPital 

in lems of low inf0nl monllily &nd prim!ry druP.uk 

Anolher mr sesking irslitution siv ins i * lo lhc laok ol pol il ical conpel ilion cd nee!|iv€rv 

idp*t .hveloFnent thrus! stnmctric lack of cEdibility 6r pGle€toEl Drcmises dd 

in{mple voter infom,iim. 's s!SS.i.d hy K*f.r (2{}04) tll)Evd, polnisl cheks

imM* il' cEdihility, Th. imp&t ol polnid comp.lition of cMlcd *onnirc$ i3 cxploEd 

i. K..ler lnd Ktuk (2002). Thty !rsu. thlt 

''ttu pre$tu o! h,hipb @to pldtrs (sowwnt &cbiD Nt B) vith Pot"iz2d i't'etu 

iNEBs tb cEdibilty of tuEEiga @Mn@tu hd BAs.t tb abil[v oleMtu b 

dljst pott i.t in th. Ntu oJ eg.tus tJwLt tbt jeo4tdb. l*n abiliE tL tnw tttil 

How.r ll* n.r .ff@l wold dGF.d uF. lhc &!E of sid PohrizaliM tlE t 

^3 

'vid@ 

"ntn!d. Eb plar.B ndht M elPr @Mri.t @ @ dhn"Iv poLtiz"I but less 

-Ln imE hrqtdit! it AEc.t ' 

533 ndrdv.InPort ft. ofth. lrto br.ndt oftnsdttrdoN 

Bo|h bdn& of i'djtuim Mdy nsl Edsa.a di dn s.ling doas inp..r gtowlh Th' 

qr.eio howE di'tt *hi|:h oldE iwo inp..ls ftc A6oC! ud lol'iq em5) o 

.ndnd f@nd inlrirdios b.!cd d r.d.b.y d6rv (Anli Rdt s4ki.s idtnuriontl do 

DmdE ! cslr.EbL inp..t d €emic Ffotll|.r Ho{.6 quik stp.i.i.glt, 0E 

ol€ of iniftlrids baed d c&o&l tlE, (risl Educing inejuioot sB 'Fl wrv 

sisni6c{ . Thc ln y siv. io this 

't.$ 'i.t is quiL 6vincin& h .btF of fori.l ft& 

rdwing inriffim - dEFlin! iBtiolions, in 9p Is till.d bv Fivd. lhcnulirc 

ininudNl .fus.nc' - Lit€ in dli.r lim6 *tFi fm.l idiloliom of ons !.d poli6 

didnl did d *@ irclfetis, popb drn r3d.d ro dwll in 8Nps Ph@ @nt8t wE 

horcFd lhrc0sn infomol pcsE ond ri{ of.xroleio nn goup. H.n@ th.n n8fts *.8 

slrsl in dlEr v!ys, tn 6hl pFlccdon fm Ht sking t h.vid would aly dcp.tld 

upon th. b.hlvid ol rllL wilh irs p@pl.. lf rhb b.hrvior pMols @npti@, imtrrcicncy d

.d.lory dnr5 io ptivitcg.d ch*s. th@ {ho d@t hav. ' lcv'l pt'ying ii'ld cdnol 'nter 

inio linils odald with s. orher cntilv in ph.. of srdc d in €e wilh cdt@r theory' 

Tnil lek ofalc.nalivc wuld b4dv driv. do*n long run gonh potpet! 

5.4 Rcglon.l Studles on l[3tlh|ttonC Growth An.lvsls 

In r|r pctiM r.cit! dE rtgElEr 18 dieusd th. apitic.l li4nlE d llE inditutinl 

dercda@B of gwln N @mia l1E .in mw k lo dics d* dpitic'l litdtrw s 

iNdft b.h.vic udqr.Im h Sed A$6 Mi!s' 3p@ifsllv in Patic{ -nis qic is 

of sid inidts b@e d* ro dir@ l*ktodb ed inenurimt .mSoFnB' tlE 

{tr.miners of St slh in Sdth ^3id 

g]Imi6 tuv b. difr@t nsn dE d'rmitur'3 or 

go*rn in dE n:n of dE r.rld, Hmwr, dE b llt limicd *oir und.n ta lo tntllu 

i'r.at'niN gNfi b€h.vit in thi. Fn oldE sl4 tht i$ h not 6 lE 4&at 6 il is i' lh' 

.bow nsjrbEn rudi.s In tlit stioG d'G Fvi* *ill6s Lw oflh€ idloitir* ''||pirbl 

lrdks o idrididll inF.r 6 tDw4 udqr.ro d tddro s rclr 6 in d. @lrdd o' 

sed nudis htw Dd. c&np{.lo cmie indnuios i. Pilir.tr s ell in euth Asitn 

rgior Mrnbob !l H.q H@d D.rclopn..t c.ntc 099), Ano.d (2001) iltu5int6 $tr 

i.rieddi ftlsuld by wld sovffc i'nk tc itdba ol voi@ .td @nbbililt. 

poliriol {6ilit}, F8ukily, qullity, ru|. of hw, ttd Mtd of c@plid tpFB lo b' 

signifiturly !tr6 ne posny- 

Eso.ci.lly in Prkiro, in{imioml vqlfts is 

'!spoi!ibl. for .d h4 polbica' intirbilitv t d 

cmpdo ud hs rcslcd in prlvil.&d egn.tB .rlcdln! rh.ir mtl tl@u8h lobbving .d 

nifl* of.urhqity (Plriih.1 .1. I998i Hwsin t99). hnnudodl imp4l on povlnv is 

.xolocd in P.khb (t99). Hos (2002) Haq od Zi! (2009). shich 5ho*s insr utions ar

n gdivcly 'nd sGrincmlly @ftl.cd wirn pov.rtv, h'ncc w6l institorions inoE st povenv 

in Plkistd. In panicrlar. study tudc bv tt!4 od Zi! (2009) overing ihc F€'iod 

or 1996_ 

2005, found cpv€IM@ itdiclroB od w.ll s pdlw gos'rn ndEd bv itcqurjg 

potcrry, borh scdql.notrg ine !o$aa in |h. stLd suSsdring lowcr quli(v of in{itudon' 

.l$ us pd. nor sping ttfids of .@mic ItoMt c bolh pownv and incqulilv h|c 

$ollm duin8 lh. D.riod. H@vd, in mlcr io th. p.Puho notbl! sludi6likc SltliqE 

!tul tl!4 e006) ha3.n m Wdd Bentt gov.dne indidto6 6nd ln'r we'* inslitutioN do 

impove *etfm of th€ si€ty b[ lh.y havc n.gttiv. inflwnE on GDP gD]4] nlo At 

ai.rhe ptce, Fenddes tnd Kruv (200?).nd E scrlt (2003) in a odsseutry dudv btsd 

on d!.d8es found t hicher ts qpir. inMc of Pikislln d mp'@d lo 6unri6 rilh 

simillr Lrcl of indtunioal quli.y, sugs6litg Pltisbt sFN nuch dm s dp'Ed of 

dhr 6mtri6 *hn simiLr Lrcl ol innnuion.l qulilicr F.m&{hs ed K@v em7) 

''ft pid di@ s&ed ht BdBlabth dtl P.tiid lw tEr cqrb i*Ms ttpt aE 

b.tu.n r$o a'I lhft. tiB hiibr l8 ttti, *ry *al idiMioul P'&M tutld 

srgAett hedoa NroEe tu$1Mry rcLatoNhips Inemt lndtu'tPer 'apih i@w it 

oal! dnod hatfofwha N nistn .\rect gtwn itt Pr 

capita it'm " 

Thc siniln 6se$mdnl in lh€ oonlext of polilisl in$iurions in nadc bv SPDC (2000)' which 

shows thd g6fih 16 considcnbly g@d unthr.dhonbi.. rul€ s mDorcd to d.Bd60v 

blr rhcy v.F nd wry su@$iil in *id sh li*. dloo.tio dd hahh dut d 'ririol in 

intreviog hmd fet@ cndownr aut|lon|,lnM nb no|ml'v is al$bEd b *at 

inritudo|s wh.€s the N is va@ EN td don*cy 

!n esioMl mt x! F€dnd6.rd Ktuy (2007) oploins fim k€t dda d Soutl &is 

courries liid tt'd priv.G infodll .fugd.nl lik. bNims Miarids dd ommunilv

n.iwods i€ fitgMry u$d bv finns when fom'l 6n1@rins in$i ions aF vok r 

5.5 To sun uP, 

ln dis.ijloLr d!€ lerrs ri*€n dpitiol 8to*d lhtnM d'd dpkcl whah'r lh' 

.Lboarivc ddi€s ft lhe gMd mlitia In empnix dlMic C'w|n i! rfiitohbk to 

di|Idt Lclds lite innlMcnE inwstndt, fiMcill dewLpnFE t&!e devcloFnenl hutun 

copiol lnLl in{rBrion. Fmpin@levi&nr )ugsci''g(unvcErM h\l,e and conters'n€ i5 

pbv.d ro b€ wdhiofll upon olhs frcids inoludi.g insrilutios onsidetd the dc\l PMiNtrl 

Lary. bod) 6f hEEm s43.$ ininurffi do pt'dM t signiFlifl mD{r d gdMh s 

difidl b.drls ol irnimod @ Ls.d in $n iM6lt gto*th n'&lt Hw*r' th' liLrne 

srill bcks u 4sr€sarc nas@ d idnditu .iNmFsing all de ditr'Gnt np96 nE 

*iy h.3 s.FEr.t ni?$!d M bflr& d idiMiN lld rh.Jn imp(l d src*{n t'i 

Part 3r Creadng Global Indlces of lnsdnrdonallzed 

social tecbnologies 

Thie Dln ofdF study D€srls lvo :ndic6 .in.d .t c.ptunlg insitutioul qulilies ofro6l of 

th€ counri* in th. wld. Firc inl€x n6uEg dnql insit'rtionol q!.litv fd 5 v6 

foitr. TIE sdd tula of ctN sri@l dor.' m..'G Smdl 

6wins h.g. nmb6 of.@ris.!d drr! s.||!6 

in paftr 

qulitv of insridiffi

Chapter6: Index of ltrstitutlonalized Social Technologles 

(Panel) 2002-06 

iin**' -i *pr ot.hrq .hr4 ont d.r inpod on e'dv 'tP* oE aM 

^,n.,,io,r'a an-aE* lr,E.tupta pe'. 8 on id?\ o! hlrutbadt@Il h/"t t"h@bed 

tparct) .ovetnt .he pztoT al 2ao2'oe rhts tnd4 k ndde up ol slb tadtes tunet atsk trdudrs 

i,h*ao"' o,a e* ad k.h'tas. ord n bq '"o @'.. \ 

'ettns 

i,-;-a ,- wufl@'tv n oner.it n.to'w o d r.o'de w" rv4 of 

;i,tu h^.d*ot*ott*tho "* "'p,^. on rra ont.eotd 

Eim Pnnoga] ffiponfu m|,sh to 

nesotns dtlezrt ose4! o! h!fturio^s TtEs. ote th.h tudh.t oooesoEd in lon sunNry inkx 

ot htsft!7o;' F!tth!, *^'nM onotwis wos p.4oned tu Esu,ts u'tnt dryeftrt 

'h'ck 'ne 

oqsrco.ttoa oqgJoncrc' t.thc.rd d@!ftawtk arhet Niot tutc.t h oko otded 

Ineirutional qorlity is oe6uEd in €mpidEl lircntuE utilizing d!6 bos pDvidcd bv vood 

@mmcr6l (PRs .!d BERI), or M{mm.rcidl (wlF: Globdl Inr€erilvi Btddtrdtj 

POLITY PROJECT dd World Bonk) oqonizNtiom tn plnicular efons lile (rstrimdnn el al 

2O()8 ; Gw!tuy dd IiwM 2()O8 ; Miller cnd Holnes 2009) a weu a nosl of $e abov. 

ddtioncd &tahss e ro agaFclL v.nds inniuiiol n6uE lo fofr mc 

nsninstul eiiml€s ol iBitutioMl qualiry dcGs rolions Most of th* 3ludies lik€ 

(Sch*$ ed Poner 2008i Cwdtney ed libn 2003; Mill* !n! Holnes 2009) do .ol 

dlBirclt jdse dE qullny of -Dsitulio6 bur e 3imed .l n*uin8 rhe ovcmll @tmic 

p€rfodrnce. Son. otheB tuus excluively on insritolions bur llck 4gEgarion World RMk 

nudy feuses d insritutios pomotinB regulding bu€uc6.ic €mcicrcies in t rns of shning 

a busiR{\ *hcRs ml,nY fdls on thc mlc of poliiiel in{itsioN. Olob.l Inlccrity 

dprucs innndio.s peiaining to dgular.rt .mci€ncy and !@unLbiliiy. Pcd.F thc nd 

omptuhcnsive srudy by Krufinmelrl. (2003) orMpls lo oovcrdvide hnBe ofin$hurione

*hi.hrhe! @lled eo Il EoEM,td44toB - @icgdizing i'slitllios in six indiel06- 

The najor shodoniogs in shidv like tht dd olh6 is let olaggEgalion as lhev t'll !bo!t 

wfilt incihrlioN m.dc6 hot do mr fms o dplaining ho{ lh'v lll lil in ro deritE 0E 

ovedll pictm of a country instir'nional p.domsQ A fw h!v' ltt'nplcd ro Povid' !n 

ag!rc8otc piclurc, bul lhis aggEgation is b.ed on clbitary d{kion wilbod fteoretldl bos3 

or objetirc medodoloSY. 

Tti study d.fiB inslitllios in tms ot i.$i[rioMliz'd $i'l ldhNlosi6 which e n'd' 

up lo ftL rcdlcing dd lni-enl seting institotions bGd on DooglN Nonh! (1981) 

il@rcti€l fEnework of "CoDF&l thorv" oflh' sl4e dd ! "PEdaiory tn@ry" oflhc slllc' 

In |nb ch.pl!r, inlcx of instirdimdizod sdial Tdntrolosie (ptDcl) is innoduc'4 *tkh 

@nsin3 of Risk i.ducitg l.chtulogies od Anli Rlnl s'rins lchnolosier In lhit co'rc& a 

dotlet oa 84 countra6 vos lsembted ior 5 v.es @lcdng th' P'riod 2002{6 To meosuE 

vsioG dinc6ioN oa imitolio.r' 34 vailbbs 6'om didcd' dota sucs h'vc bcn 

combiftd into 12 indi6 in . f(m thit rh.v e !sgE!,r'd inb le sb indi6 nmdv Indd 

ol Rbk r.dftins FcnnobBi.s dd indd of AntiMt @king Lchnolocr6 Th' suEind*s 

!E in tom lsgtsd.d into on. sidsle indd naisdds ov'mll iNtitulions- Tnis lSgrcsilion 's 

pqaonn d usins Primipol Conpo@ . 

Thit objecr . oalysk lims tt spnri.g Mridt' insnriotl pcrf{)llil!@ lhoud *ide 

619. of institulioMl voiablcs onbined to8.lh.r. rn ftis wav lhis index enampo$cs bolh 

tn. Nonh's cedct ud pFd.lorv th.on6 

Tnk Chap&r is o4!riz.d c follovsr srio I givct inhducrio( s'ction 2 otm 

mcrhodolos/ .nd dtional€ for i.d.x @nFn.nEi stion 3 'xnibiis lhe indi6 dd 

comDo.ison with orh.E, lnd the lasl srio gives conclrsioD md Mmm'ndations

5.2, Methoilology and Data Co ectlon 

ln this @tio $. nodv *ill fds d in&r denptit! dala sucs 

6.2.1 Descripdon of Indlces 

This *ction d.fin6 $e comDulttion of d€ fotlolins indies 

ttd.t ot latitutiondtited lo.tal rdhnologht lp@l) 20024 (Isr0205l 

fie rem sial dchnologi.s' refc6 to thosc roulincs or pFgdn of diD€ thich nrudu6 

hDmd inbmolion and tEhlvior wilt one ..oths 6 well as b cnvironnenl lt shqEs the 

dccision mlkin3 plll:s l le@ Dlni.g nc fomallv, Inslirutiotulizd sid &hnolosies 

d $@ sial ldhnologids lhot iav. low ldnslion con and d inslituiiontlizdd bv si'rv 

or gov.mmenl. ll is t brndle of informilio. thll @nsists ol b ines and proce$os imposd 

by sicly, wlich c€res p$ilive sB in lt* 4sonv TrEe Mts m paid to impmvrns and 

re$lt in schum!€teiln csiivc d€nrdio htling posilit' sitl 

a$ur0.s frcm divedion .n'l also reslves rhe pobl€m oi dvmmetic itrfomttion as tr 

devclops mub tnd lmong asenls Thh @ues incEsing Elum b s 

dE6 iNl]€dvc i6tiuioMli4d si.l t@hrcloxs' *ill not dl, inc@ llE risk bot ale 

direri snomic agents fiom imvariv. elivili's t!] sldns Enl: dd Esult in m€rc 

ed*uibunonor qaxh *ithin ihe ecmm)..Mnng incqulliry 

This is $ .g€t Ed€ co$ n.rioEl ind.x lhtt d@nFs tht imptd otall insritltional 

p.rfomance indidrod and compdss oa tndcx of Rish R'drcing TdhnoLrgi's dd rh' In'kx 

ofAnri Rdt sekj.g'I4hoologi€s (s* Figurc I I

5.zt .7, h.l4 ol BtsL t.dsiasre.haolotLt Fnl 

rid cmporqt of iBrnudoalizen $ial ldhnologv is 4lled iist tlducins bhnolosv lr 

nNG idritulion.l orustmetu rlrd BllE hstioMl risl Rhk it m imponanr 

component of busin.ss decisions which Equi@s lons lcm dnwlios lha{ Equne 

lrosrclioml sust. wsll enrorced Risk cducin! techno'ogid sntnglhen lhh transctronal 

1rusl, IdcEasd ni. ofdtopnalion dd conti$lrion of DFpertv 

riShs *o!ld aus' dive*rn 

of EoulG aoF pn!!div. acriviri's 'o Fiv'G mnscrcnr h p'oleling lhcn nghs This 

lole6 proiuftny, Bhich can 6c avoidcd bt ptopdlv inniturionrtiziq Risk Educing cial 

tshnologi.s. Ia pop.rty riEhrs &e nor sauE{i, fi€ busines will div'n pan ol $en deo'ccs 

lron pdducliro elivnios lo pBrarins then trcp.dv, lik' hning guords lnstilurionalzinB 

Ris* '.ducing *ial Lchnologid dG not oans coll4rirelv hning gurds bv stD Proves 

b b. chap.r. lt IMns .har no glards trc i4riEi in $t 6d pl@ lnd'x ofnst Educ'ns 

rchnologis rE tunher dividgl into fouowing indices 

r) lndex of pop.ny iight b) Indcx of Justice dnd Law cnfor@nenl c) indcx or Polidv 

sbbitily dd e). Rul. oa law indd of *ond gov.nmce indi@ro6 Th'ir wcishri4s in 'isk 

EdNhg r4hnolo8t i.dcx @ 26!4 26/a, 21% 8d 27oA BFtivdv Ttcs sub @np'o'nrs 

!E haclly cl.boEtcd below. 

6 2l I.l lalet ol Ptuptttt tishs fstcr,'i 

This sub indcx of index ol invo$n'nr md fintncial 

dgnts potclion includs indi€rors fton eures nm'ly eon'nic fE dom ol World rnd 

llsibge fduddltion with cqul aeiells 

62.t.L2 ht&x of Jtttic. cd In .,!.r@ti (sit : Inis @Fah'nsiv' ind'x ol justce 

md kw enfoEd.nr mssu6 l) l€gr.lsr3tm ind.ps&M, 2) sknglh ud impltialirv ol 

lcEal syden, popul{r obsenadcc ol law 3) Torluft, Fxidjudioid Killins. Polirical

Irp.ism.i! tnt Detpc.dw 'ndica(E 

Tbet w€ishrs !rc 2 rvq 2lyq l7%, rv/\22r\ dtrJ 25v' ftsgrive! 

lnd rule ofh* i.dis ofl) lcRC ed 6) BERI 

6,21.1.3 hrk! of potlct tt bltttr (ttti). lssrc of poliov instlbililv mdinlv siss b'cous or 

inslal'le poli 6l idinllim, 'll)is @mpotr oarisk Ed@in8 t@nnob8v @v'6 iss sEh 

as l) Ercculive ConnninB, 2) Mililarv inlerf.En@ in rule of kw dd lh€ polhioal p|@ss' 

polilisl sllbility indi6 of l) wct, .4) ICRG dd 5) BDRI i@using on Sr$jlitv of 

D€monri lnstituiidE crv.nn.nl shbilitt tnd nrdd.lizlti@ it si.tt. o''ir wcishts 

are 2 so/q | 4rk | 8o/\22o/\2 | V. csFcrir.ly 

6"2.1.2. tndd ol Anr!.a. t d.itt TechtutDgl.s (N) 

Ihis ind.x exclusively l4$s on tnN Anli R.nt s€ekidg ldhnologi6 lnal Plugs in prcdalorv 

opporluniti.s disitg due lo glPr in in$nurions. As oppos.d lo Dnductive lolivilies! renl 

sk6 b€mfits al de dpene olorh.u s n lits rie b pEdltorv ddvni.s ll cMLs enls 

for conttolli4 acr6 b.ni.e lh.m hienq Ftom thtn dmugh iMovltid hdcc, in shon ru4 

moting *ieiy move foo innovttile lo Enl skina aolivilics, which Esulre in lh. los of 

pDd@tivily. Bur in thc lds fln lh€ poft dilf@nlill would ditn drrcpEmunrl cfdls tnd 

mrce lm ircd$ in produrivi.y drcuSh inmYdion b unprodtdiv. Fld'rorv 

diviries, Ir rould also €i* rhe cosl of potcolion ogaini div.tsio sd dpopriatd as 

nDmhq of prldltrs inc@r Mortq, ts sllnlio els iir lhs preddoE *ill an on 

orn r !r.d ors, h€@ in 6. cftd boD Ftd.lou ed imr€ior lN Fofil 

(Usn$, l98n This 

innex focues on l@hnolqics which h.lpt .liminlte lhe kinds ol Enl. Accordingl, ir h 

subdivid.d i.!o thE indi4s Mely index oi Iniidlio@l tnii ind.x of Policy rcnts od 

indcr 6f ltblniet d wirh wighllgc of36 35%and29%E etircIy. Bnd&siplio of 

difercnr sub indicF isgivcn rs follm.

6.2.r.2,1 hdd or ldftunon.l tuds lRlrl: 

This indd exclusivoly lNus on ll$s Fnl! lh.r die due t' Ndk insritulions PFlidins 

dehrl @wEsp of dillmr itnn iN! w4ll6 in Fnioulor' 

ltis indq rNFs on a) 

R.Bulalory tnd Buttsdtc Dffjci.ncv b) Lh* ol doins bsin* 'rd cl Cmotion' *iin 

wcighlrgetof32yq 34%and l4%Bperivclt srmotrv a@Ul olaoh ir aiven b'lo* 

' Th. cfroclile instilutions Mn onry bv 

mfon*d thNgh Sov.mdt dd lhc goffifiol inpkme'ls cov'mre 

thiouSh lhc 

machinery oa B@Esv Hetr qutnv of busutuv @ &!'mit' quliiv of rheir 

iditulid. fti! index lNuss to nB@s this qltlirv it &rns of l) blMuc@v coss and 

govemn.n ollcctiv..cs indies ol2) ICRC, 3) BDRI t'd 4) wcl with weisnrs ol23%' 

25%, 24%, l3% Esp*ljvclY 

6.2.1.2-12 l)t* olrbie bwi*s: Thn ind.x lews on aU dr@ inslitutiontl imDedim'nts 

thar F.Ht sod tundimi.s ofbdsinss. ft lc6 m Ti@ (d!vs), Coi (% of inume 

Fr dpita), tn. numb.r of prs€ltures Dd olhq Egul.tct burda in b6incss lt incldd6 

brsire$ fe€dom indcx of Hcritage, $.rning s bBinc$ index of EFW md EgDlalorv quulv 

indd of ICRC, wilh weiShb of l5vq ]l% lnd 32% Espeiiv€l'' 

62.t 213 Aruhn: This inder dclosivcly fels d thc p.td'bv Ents qhcb' bv 

.senis in o6ie of po*r. tu lEmtt.d b s.n. (2001) 

''1" ecorcne! Dh',e EnteeLhs is 4 8.Ntultv @ePted va! d ttte ore nEht erpecl 

owight to bs .lmcir !4 eseEe, ebiaktlal B'ouet -orA hoe tn 

hteMrc, thal b L.plt e@rctu.l i4 . cdtw of @nqtion 

This index sist' of indid ihd Muc dbl of @Drbn 6w diff.dr s'g lilt' 

lCRc, BERI, TEBp6Mcy IntddioMl (TlI in

cxfa p6tn.nt si@ to ofiici.ls to e.r d.ir wdt dorc bt bEiN tnd individuls masurel 

ty EFW. Ticir Neighrs arc 2lyq l l'/",22vq22%,221/, @s@tiv.ly 

6r.r:.r hdd 6f rd.Y 6a |o0. 

Th* e cls Ents lh &i*s wnd sovcmmqn follos prlrclioirt policv c@ting 

inellici.ncies by vty oi prot*tins ineFEi.nl business Wh.lcver b' lh€ cMn' 'onsonsl 

liev trElb rhcs ren$ N b.d 6 inslitutiontl rcnls or d$ tos l his index nqsuEs I ) Pri@ 

dhls, 2) lni€x of Rcglhdy qulily blcn fiom *dld go*ll|sG indioras ond l) 

rdninislEtiv. rcqun€m.nt bBiMs hos b tulfill, *hich muld iclude €poning t'quiEmen6 

6 w.ll 6 rcsularory resliction fhet weighls !rc l2%, 2Elo and 2El. ssp€ctivelv 

6r.1.2.t r.d.r oa Porbr d Gd,: 

This indcx n.dr6 lh. cxt.nt or powtr giv€n bt inslilutids ld politidl aurhcilics Po*& 

vilhoul MDr.&bililt and ch@ks would cMlc colnicl of inl€ftsr behren polilical 

edqili6 .nd thei. o6lilumi6. fie bisg6( coE vt chek is lh€ dEt oa b.i.g wlcd 

od, How*.r lhc @dibilitt of th* lhre.|l Srdrly d€pddt upd infomtrid Evnm.tv 

bellecn vols and their andidote. This infom ion lsFmotrv oo be binimizd rhrcugh 

n4ufr sh s li€t p,6 tnd n dit, civil tit nies' Yibani civil si€tv ot!.niaiim dd 

pxblic ac to infmdid. This nrdq is funh€. diYidq, i.ro Ind.x of Foliri@l P.nidp$o 

md ompdniven4s, .!d Ind.x oI voice 0.d A@unlabilitv wilh cqul *eienbgr' 

6-2-t.2.J.t Indz' ot @litical r@lEj@iat ad !!tlE!!!!!!Bt!r Tiis index m.auEs lhe 

€xc of l) politi@t mFliliwdr 2) dles sovming 

chi€f d*diw rtuninB ed 

eldlions, l.v€l plrying fEld pDtnkd ro Inliticdl pddicipa s lain€ss a.d imptniolitv of 

el4ro6l pM.ss dd l) lN.dm lo ongrgo in pohicol &tiviti.s. Th.ir wei8hts arc 33vq 

I l7q lnd 36% E*erivelt. 

6.2.1.2.).2 ltuLt olvoie ud ANtaabilitr: This ind€x mdsuFs l) 6*1m or n€di. .nd 

pE$ a! well 6 2i ftccdon ol oilians lo voiF rheir coremt It.re i'olldes voice dd

0@ounhbility indcr of wodd govemc. indicltt Th€v si@ 32va 34%' rnd 43% w'ights 

Fislnliw ddiFln of tle iadi6 is povid.d in FigE 5, *hcB d'$tiptior or $b 

indices is Fovid.d in ubl. l [rer.il d6.ripli{E of lltir d'h sB !E ircludcd i'

tledrl*'}d'dtffi.t@t*/l.'6 

/l rsii.sr| lort) 

/id. 

/ t-,*",*". 

tl/iw 

Nln*l*n" 

\ L-grglesL- 

\f ,*";,; 

H:llrl1l 

( 

jlgIgtr . . I

.ht t: E .d4qols,bt{tk Lnsr02o5 

r@ 

9:! 

9!: 

922 

___-!g?. 9!*:- q!! 

r!q4!a!!eqE!!s4!|lr|g 

!g 

!4 

c4 

:! 

--s*#-a 

j@|..!...dw 

rddrdd!!- 

iiE--tuhdcrhddF.rd'@5 

ffir*rrb's,t4!!!4r$io 

flb*rY.^!..d!q!i414) 

.db-.dr.^bddY4.4lq4l 

qa 

g!! 

q! 

q?! 

q! 

q4

6.2, I)la. Sqr:r.. lrd D..{rttlo! 

Ou idq co@ ta.ordt ., MiiS qlaEld rryldG V. adlr 3a l|! r|6 

pqr.lninr io drs dnfte ln ihc @.tucdd ofild* Il4ffidd gl|16 d|ry.lltbllt 

v.rt i6 ddt b caelt dn bra colaa. of 29 d|.r 0!€ F d!ty, Illttil 

rdd. ddE.b ss c d/r b T*L Z o! bik i d& '? of al utbl6 

lBlqdilr n'do.., oo{ti't rl* ra. of hdnnid ffi!. Po. de wi't i,r bs 

(b &r El artia.r.l ft.drr it l, L.., lidr r Fhl'un of 45. tlb n46 bl of2,68t 

(b rotu 6m rti.l lb brk ir odud. DdidF dd€.f rtll||!la e 

Foid.d h Ttblc 3. Ddll d..q@o of b Eia'lc. .bi rb oqd r! Fovficd h

tr*. N.r6 qltb w r- Nnit st.t hddb.ltu"

f.bt t Esld'' s,,}d6 ot vsl',r'g /*r'96 t@4 lAdatdtdl ed

6.2.3 Aggregatlon Methodolo$f 

6.2,t.1 nomdl2o on ke4l@ 

Be@e oldir@ BasrinB s.ts uel in difi€Enl vorbks io imlu& rh'D in ndds 

noNali4don lreornql h 6€n $eFby ssling each vqriable in tems of do io onc *heE 

fiighs vdF &noL stogd in$itudN In dilinE th€ foltosinS fornuh is uscd for 

aansfom.tio if rhe hishd v!lo4 or dE origintl vtriable indi@lc wmk inslilltio6 (U*c 

.mtry tui!) (Vs.vry(va-Vm). Cdv.*|y' whd hiEh€r €16 iidiolc sbns 

indnudoftt rh. fomuh (v.vo,rMv*' V.h) is uscd Hd€ v,-disind vrlues' v* = 

Mdimum valw acin d by @ntt in Migiul indo! VE = Minidm valuc tlIlimd bv 

counq in odeinal ind.x. simihr sn!&gy i! bcing emplord in crdrid o'tttious i'dicca 

.o&bly Gw.rnEy ed t }s (2m3) Mil|{ od Holms (2009) md s.nsb tud Pons 

(2003). 

6.23.3 w.lgl,tht an l agqegptlot n th..lolow. 

wcish6 fd $b indiEs &d vdabl* @ qlculll€d Ning PrinciFl @mpn€trlMlysis sine 

tlis indqx dptures pqiods of 2002 to 2006, !o D*. itd.x @mp&ible &,s lime' lh. 

'tslEs sill iiply sjnils wi8liing s.lEm. ffi Fio& 

Wnn 3!m rci3hls fd.ll 

y€lrn vfidlioG in counlrid vilucs oE brscd on ft€n rthiv. iNlilutional p€raommoq not 

by cho8. in *ishis. Th.E 6 bc 6w dficM linds of *iBbdns th.rc t65.d @ th. 

vNlDd or lhcir Espdtive y4. On€ po$ibilitt is io choose ! b4e yst and wiShl olheE 

lee.linBly' Rdn r dfl .lbireily ch@in3 bN r!r, il is F.tcnbl. io .v.6e. $cit 

p€iodic vrlG suh thot 4h contr' hls single vslG for ! vdftla W.ighls .c calcular€d

d tl* h.sis of dN nlu6 Thd sv.Es6 edld be in niddle ol dE mse of {lu's h'ne 

nNt rcprcsnred dong olhen Fon cns ountrv awng6. pntriP'l comporcnt analvsis B 

Bed i. rhis stdy 10 ektr .pptr'rn'b wisrits oa ditl.Enr $b.s'pondls u*d 'n 

{ggEgi.lion. As Gwdn€y od L.ren (2001: ?) wirc: 

''1r. Ptigipltr cMPotutu erlttll nt @d to .Lbmie tlE weiEh giw to e@h qdn* 

in !h. cost&tior oJ the id* l'hk p$elut PatuiM n' rNiM of a set oJ witble! 

a*! @t it b &tetniE lc IiEe conbi,dlioi - ttu ve'shB ol thek wrtobtis utul 

Minik lk vuia'i@ of th. Nlr @Ntrektl PrituiN .d!tuNd I" zfed, the tu*lt 

Mttukd prtripd conporetr h tb wiabk 1tu7 eaptws ttu reilio' oltht und'n he 

@nwA t tust flllr' I ^ an ohjeti|9 tutlbd of onhin ,s d st oI rdables i"to a i\ld 

rdiable tld b.tt anec4 tlz ongid Aaa 

Tte 3iditf pudurc is adopt d h.E 6 *tl F&lo exMio is b.ei d oECl) {2m3) as 

'f1t, pri&i4! N"tPoMs adtss i' Lal b.n8t letB lManlv I9l) tfe ctde 

lrctos tbt j1ljll tlc* Mrtt ti.N: (i) tuo. tsociaba eise,vlks ta4er thh ore: (tt) 

.oturibtu he,ilhdnr b n e'pl@iM o! osrtt turiM bv tuE iw t0%: od A'i) 

.onnibuto ctnulati'ely k tla d?ttMion o.f lle owtoll wiaw bv noE thtn 6014 

'ftir is lolloq€d bt Oc tuiio pt@luE. Nomally, vtrilbL ladinsr re sldqd Mrds 

rne fist h.to. This is done lo disribuie lhe vari.ble ldding evenlv among facto6. ft is us.d 

ln b.lrs inr.DNidid ol ish a..ddina b ft.n ETariw vdilhbs *til€ nd 

conpbmisilg on lhc ootcome. th.* frcbs !E the. squffid aner rcr.don This rcpresents 

dE roLl vdiatir of v{i.hl. qpluB hy th. feror. The Fdo6 aggEelr.d by 6i3!irg ! 

weighl io.eh o.c ofrhen .+al ro the poportion otlh. *plain d varid€ in lhc dlb s.t 

rord.i.diningrh€ weigh ofn vsi le ued in nder w. *kcllh. f&to.dFuringnd of 

its variarion. Then vfiable w.i$t in faclor is oDlipli.d by fmloas weight in jndeL Th.

sinilf p6.cduE b Epdi.d for orhd wirbta Thb !pp@h of dltloting wcishts is als! 

.dopi.i by Ni@lctli er ,1. (2000). Tlblc | {tisplavs th' cooporcnt veishts of vlddblcs in sb 

indies orlculokd 6m p.incipll component 'nalt6ie, whil' wishlt of sub indi6 uad in 

Moary indic6 @ diahvtd in p.e Es in Fi$El DdiL of 'xtrdtd fel6 e 

Fovid.d i. $bL 4 rl&@ lh. ompo.enlr of dtttd &d rotlicd llolo6 tloru {ilh 

omponenr *.ighs e Cjren in labl. 5 W. haw sls ob€dwd th't 'si'c' tn€ utuLdyi'8 

vduca of wi.bl6 d !v.88. @ quire cofrlal€d sirn m lDlttr,lh6 choie of w4t s 

us.d to mllud dE tssFSlG inli6 do.s mr eb$ntitllv !fr4r lhc @lt lhtl ec EDort' 

Thir ir ale obsn€d in rhc etsililnv @lvds psvidod d lhe end of ohoptcf 'ppcndix B' 

vhed @ml.lion wnh nrdEr skuht d lilh !6it!rv {€ighls ptorcd €xllsnclv high with 

For A8sr€srlic! w. mphy liM lsgE!.rio *lich i, ltE smmorion oa sighis !trd 

nm.lized individul indic.loa. 

f&!. a: tad.r E tudka dn eobu6 boatt @ pdtvt?.t aMP@.d

f.ht t: Etufrc Fdd nu.kot.n t *tohq njro206

q 

aL3,afEoni2ra 4 Ml'dng tu 

TIEE i3lls isu.6f&6avoil.bilitt ofdifi.E v.ntbbclo Mcdd! eur"s dlv '4 

ob6dalios or ditr@nllino pe.iods 6 be stth@d lffor anv country' a partiouhr lariablc 

h.ve l€$ the tivc vrlrcs (oe * noF wlB ofcetr.in vs^ tur c.ruin vsi.bL mhsa'g)' 

rhd rhc Mh.r dirs E* of th. vdB of dl.r veilble fbr th.1 @nl'v. In rhis v!r' 

codnrrict indie oE @p@ble enN dn.. To Dmove the etT€ct dfomitted or umwilAble 

v&iabL for a Fnicul.r couty fitn ink& tlE rcs@lEr mdoys dynmic wishlinr, 

rh...5y movins lh€ c{iat of umvliLbl. {te1! lrom indcL D)dmic *ethlin8 Esimc 

Fnov€! !alu. tsn ftc index elculrtions wh.n no dita @ p@nl in c.nain v.ti.ble for ! 

ctuin @urry. Tls th. rrilbL wigh( is +E!d lmdg 0{6 M!ini.8 vuirblcs fs 

which d!1o ae pEel in pmFnion ro $cn ntio of then &spctive N.ighls dilided by sum 

of lll Eroining wcignE. Sinild wighiing E8ine is lle.Fploy.d an Schw.b dd Pond 

(2008) ltr th.ir qsrludim of wld dDcdirc indq. 

6.3, Inttitu onal ln.lig ncsulb a l A"alysis 

This eotid rcpons i.dq of anstitulionrliz€d scial |c hnologi.s (pml) ltr 2006 dd its 3!b 

indi6, A l@l otnim @jo. irdies d ldidcd lor 2m6 a d€pict rl nd T.bl.5, orlcr 

0a

slb inlic* for 2006.! wll s fa dhd vc.r3 @ avlilnu. in Ap!@dix A !t ti! "d ofihis 

chaDG.. surEry indi6 or dhs 4 p.no& d.l$ dis?htt

fotq 5: tndu ol tnnnunondlud set l r..nnobf,t6 tpoacll2M2 6 'a ns 

$bt dt6lt6.d h, ttttu26 M* k 20051 

!E 

l9 

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r! 

t 

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ii 

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g € 

[. 

:* 

It 

!: 

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:t.,i i, . .- 

;t. 

rclF!4ta* EE 

r!l&E!l!@= 

i#]Efl ! 

ffi

.tt 7: earlre rt hd.t o! tntdu.t "tth.dsat tf.'ln"totht(,Mt)2002' 

IE 

!{ 

:t 

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!i 

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t; 

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ffiffi*. 

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ffi 

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€ 

ffi 

ffi*, 

ffi tF. 

trulbFl 

ffi ffi; 

ffitr 

ffiHffi 

ffi 

@@ffi-

Fbqa: I'cfc2t6 d a8{ wbn 

'ir 

tH- 

+.+ 

s 

I 

Scatbr plol in rrsB! 6 cLilt dFB poddE dldoodip .'er tn6o vdirbLa TlDL 8 

6norB6di6rlrii8 B mn Fft.|rc ld rt hi&id turhg. To9 6 

.d teo ld caftL e.rbed. Wt.E ii b.vLldt drr roO la dD!i6 edng b 

ArMic Ffd!ll.@ 4 .L. mds top l5 @di.r r.codiDg to iNdnni@5, rhi. 

Fldioirhip nitbl @a !. aidq!€ b. Ddrd lO 6rdr.r, ! rl.y t E inri!d6. dtha 

|+lo bdc ll| Tii. i1.to dirk l tb F.fitF t lcE ai. G lloa IlL.lF6 rlri 

fr. i'Ddai.d dtr|!;r, !@'d$ d-a! h hdidol qdtry dy tuI bilg drt 

lDp66{t in e.o!@i. d.bs, .r @F!d io dcn oouEi* HovlE, .ny d.f.iIlrc 

dcl'abro.it ddld c{y.nd fdn lrlpidd e!Fi',

f.e t: nsfona r"d ctuvrh c'n{athffi: Ardtsls.l b"r td*od 

;r'-.-r]nffi.]ii6r r.'-;fr;F; 5'€i Fn'd $ev dnrcd r"dd''rr' 

"t"*s:..or ^'n 

4P .$cn€d .hain Mdn€d 

' 

nd summec (20os), ror llsr €lms, a 

!.J!aj 

41! 4! 

".8€D -- 

:r 

73 9ri!!797 

1996.616 

,0q.67 ;a foi,s?6r 

t To}s,ii 

t9 

q 

tt

chapAr 6 Aryenitix A: Detailed Results oftne hdex ol Institudonallze'l 

soctat Te.hnotogis (panel) 2OO2'05 an.I its sub i"lies 

lndex of Bureaucratic Efficiency (Ri8i) 

iia;-ERr^ 6 o 1"! !,!99 ,942 -!,14!--91!r 

fud606&705]'0'5.'ogn 

d 75e4 0 7:tr u /ql! 

orl|] qry?lq !,1?!! 

B-E-lEiir-uir ! 4t !.1!!t--921__!l l!! 

€o-i- 'd 

o.or? odo, oorr ole oner 

Bo-iffi-r. olqa oiel' 0.n,. o.a. o5oa' 

ffia -ose oM o.4! !!i11 q:9!1--9gl 

i:]]]-'!ftnad$r 

cHrN^ 

azEaH REPUBLTC 

DOTTN|CAN REPUBIIC 

o?B o.rM o7q4 

o,?,q' 0570 offi 

0.{A 0 {7e !lll! 

0.78 aqq92 o.5ee

ffi 

+ffi 

Isa! !L 

ffi 

.6 otr o.t?. orllt or?q 0r$6 

EifrffidF--- 6 b'rr oqu orn 06r' o/'?n 

srfl 

5ifr;iEi6\ 

:Lo-e? o.M o6t' 06.& oat 

4 d!7G oq.! 0\1q o5o/r o5'2r 

0.7096 o5353 0 670s 

oe! o ttt 0 7et3 

o7't 9at d.7136 

x o.$@ ot$ o5ze 9!9!! !j119 

r n.isv o5a 

t tr osi.8 0.6 q!4: 91!g 

0!& o 53, o 56$ 

Jc,ANoA t r6, o {!! o.4a o @q o l3le 

oa' 05s2 !4!!? 

UMIED NI{GOOT 

uNrrED sr tEs 6 disr 0616 

GiE Er^ ei o@ 0.406€ oi$ snx o@ 

ZAMs^

lndex of CorruPtion (Ricil 

4!ge -- 

4rg!4lcgL 

!9194 !A- 

s4!!3!t!E!E 

;i;i;ir 

zlq 

t 

l!_ 

4 

.3! 

l1 

! 

!a 

E 

z2 

.:q 

c4! 

sql 

94 

!lz9r 

i=!! 

!,39S 

qtz:g 

4@ 

!39 

!,!!r! 

!,!e1 

-q,!c! 

E!!!!gL- 4 

5J 

9,19e 

olJrltd 

liffi 

2003 zoo4 'lmt 

q!!9! lgI 

,s 048 o5tl 

n060*9 

9!g! 9!:E g!:!! 

1006 

94]L 

!4:L 

!,:tgL 

-s2L 

!,rEl 

.q4g 

ltqa 

9t::1 

glq 

oss qr& 0rt5

n__r-osoilq__e!L--13! 

it__-n6-oLt o@ o{D qalg 

---9:!:!.L ---9:!rI 

-{ 

o! .$' orE ,- - 

!--n;6-----nns o,f! j4ll,!lgi! 

E__iia--it !r!!,-----!l!9-----!!!l 

n-----nF ls !24 --!-L,--!4! 

t_--ic-0L'rlq,.q!q s!!!!

Index of Ease of doing business (Rleil 

'-E1-Rf.a. 

6 ---s!,01nl rr4----!399-!4l 

od r4!----- - ,-!!i 

-'-or a--6u oi q?!4,--l ? 

- oi6 rt99-----.9-gll ,---9l!!r 

t-' o6x oer -.s-e99---14 -!i::3 

;----niEi-----n6- q!9r! 

--ou 

--llg---- 

6 

ii--o{s o/rr q!q! ,--9]9,,-JIr 

e-0., --s!.0.!!=!,--g!e-----.slg 

o.,'. 

--.dso@!arl---!l?lr-----i.:ei 

d----_6iD-----i; 

d_-odr 06 a,!!q -----e!!]l------9Al: 

;-----nG-----nr o4! ---!j9e,-1.:9ll 

__!19,,---!lg3 

t -_nts-6 oe,! l 

os? odrt rtq:9-----!!14- ,-9l:!: 

o6,s . * 9l!?l ql* 

t-dtn o c, !lq!-- l- !4! 

t--dtst ----o 

;:.......ffi oat o,c ont 

t-r .!e orr r!!q? 

E---_-jti!-----.'-r7!6042! 

---Je!-----1j9q 

i-d!ro 06ll --srgc- -!5!l 

-s 

t ----n6 -d-o?!! !-gra, lMl 

n ------ia nat qrul __-q!4 ,-.s:!E 

;-----n6---_-6- Gl dRa o*s 

o.s^ oe! rllq,---l9g----- ! 

!86 o r$ 0!!q 

--o 

--!eg --.sllq 

--od oa qa! ----ll9a:-----.9t!l 

::-----Fi o--!L !$s oe' oer 

iffi,r !!q!r ---- 

-, 

:!---- 

G----d6t-----6 llar !4, ,9-E! 

i-ffi 

os]6l !iss-----.!: 

------int-----i ..,! 6'e Mr 

i@ - ---n:iii--otr 

;t ----iG-----ni qr?! !12!, !l 

;------n6-_ --.M q4c! ,qtg sl! 

5*-s- --d o4or sli!----- 11 

:-atre 

--55rrct 

,fud 

6 o.ru. 

sos0Bl 

& o-iro

-qe4,---lg99- 

2 

4 

g 

4g 

I 

z! 

z! 

!q 

! 

I 

!9 

E 

12 

! 

l! 

P 

.l! 

E 

5 

!,9!l 

!,!r: 

_!191 

!4q 

_gtq 

994 

ga! 

gg:i 

tl41 

!4 

i@! 

94!! 

!4:1 

!E! 

!!!q 

_-4t1 

_!,!c 

L!4 

jiz! 

!18 

!!:! 

-9E11 

-9,!!4 

9g:! 

99 

!!!1 

!!!! 

!e9! 

!!g! 

st41 

-!2! 

!l!i 

_!lg 

!,!*4 

_!!!

lndex of Institutional Rents (Riil 

---llr:!--- 

-_.;E__nfl!4! 

r--trD o l!4qr 

n-o@' .ur r4 --lg-,q!e 

-!-E!L,---!]E 

t-----nt os 

orla 

----i6-----t$ 

Ml]lg 

t-i-i!-dr. .l$ !44---iglll 

t---dtiru @ d ffi 

;i---6iit-----nn- r4 jr!t-- 1? 

t__-nu-is-r!sl__! slll 

ii----nF _o@--ar!4 ,- !r 

i j-oroo.4ri94,!]*!-----l5e 

--_-n6-or!q:e-,-slg------ 

6__--!B o rlq jt!L,-l 

n-----;ffiod' 

o6a! o@r 

i--0,5$ 01'' llE ----SlEg 

os !r:4-----! !--4e 

tffi !N dn mE 

a----n6- -@ os' deB Dtr 

6_----ni6 ---s !'s ozn ox' 

ii_-@--a g!19_____1,9:r! 

------n-N o r,3, r 

it_---nG-----nle qr!4,q-sL,!-9IP 

-ora iffi0s d r9 

'_ru 

t------ai--ns dr9? s!cl!,!i:: 

-owoF '! o{fial 

t- oMn 

@61 

:_M7re 

IdE,oa 

-dlro i oMr om otqi rl!!! 

.'ofl0{nd.4.0tr 

W' 

a0mons

ii---6-ul1-04:4--14-- 

--o5ar''!a!!e__---91!n---11!

ffi 

Index of Policy Rents (Rll) 

ffi 

__f 

_.:r 

I 

-19 _! 

_2 

_a 

_L 

_.1! 

_.!! 

94!! 

9S4 

!49 

llg 

l3! 

!,!9!! 

!!4 

!!94 

s!91 

q!!c 

_!!e 

3Al 

949! 

!l!! 

glE 

_94 

lg 

g!81 

!!q! 

@ 

94!1 

!!s1 

!,!c! 

_.s!:! 

!49 

jgg 

!!91 

9!t: 

iffi--E 6 

i------Erc G!!l S!!4,--ir 

o!$ dr9r' d* .f o{r 

e Mt o6t o!tr dlst os 

-Mr0d 

a q!!! 

9!g 

J 

! 9:!:C 

! 

9!:!1 

!t 9,?!! 

9,!:!! 

r4 

9,!4! 

q!I! 

q!!! 

949 

i:!! 

9,!g! 

94l! 

Llg 

s]]r 

s!99!

tffillrgl!!e!E!_ 

lgl!9- 

-$Egt- 

j!4!- 

t4g!- 

|d- 

94t! 

!41! 

J!! 

!,!gl 

!4 

llg 

!l9g 

!!ga 

!,!31 

@ 

!!!E

tndex of Political participation and Competitiveness 

(RpPi) 

iirua- 

! 

4 

qlqi 9,!94 

s:l:l 

.9ic1 

qlql 

I 

ni6- 

slq 

__l 

-_.1 

l9l: 

s!3 

9l4r 

66:t 

_! 

_31! 

2L 

!,:cl 

9,:44 

s!99 

-g:91 

--s4 

itlg 

-!4 

c:gi 

g!q: 

j 

nEit 

rq]l 

!4:1 

--r 

.,! 

.c93 

iiEr6;-----------!-"o{lre 0a! ov{ 0e 

r 0# d6 06!.! lllq 

x E&r o$t 0rr odt q!!11 

56d! 

q3l 

!'Mr 

4dBrds 

I 

1! r r 

IESAA !9 q:E glE 9E!

6- -iai--fl !!!r! ,---941]--ffio$o'o'ff 

tijosl osr r!4-----! 9L!9i: 

n----n6i-----s os$ osr oer 

affio$ os3 Mr oq,ru! 

a--_--Tiii---_-''iii !]!___ 

t-o*$ o*rr r!!tr--- 

!ll! 

l 

:i;iii=....-^Fs4--q!-g!i---ser--J!::-----lrr:1 

i!------- 

I 

$_-o,l' o.I' ]: 

t---_--nE------$ 05 

-o,ndrro@o..]]od 

---_-'iEl-----nEl sa! 

B 

td 

B 

od 

' 

I I 

;i__6ii!-oLddr oD' 0'6? 

n-=.-._s!- 

d--ec-------l 

n-----i;t-----ntiren' o4 oe 

d-------nt on qr! !I---- 

lIB-{ r c s L----l------- 

E------n-@ qz -----l-------.1 

--!l!-n-----6--re 

o@ !@ d8

lndex of volce and Accountability (RpvAi) 

lsEeq- 

s 

2 

! 

l! 

:? 

! 

diE 

9e!1 

!!!1 

@! 

9jg1 

sg! 

!!!! 

!4!! 

!t4 

_g!! 

L!!l 

9!E! 

9!a! 

gg] 

diF 

9!g 

@! 

l!4 

@. 

g?91 

9,:E4 

-iE---Tie- 

l'fu o1!! s!9r_____g 

.M' 

!E os 

o.!!! 

o8 

q!94----o|re 

:!!--06 

q!!! 

4a4 

g5! 

__ !31 

' 

-r 

M - 

l! 

4 

-dtr 

re 

qi4 

9!g 

Clq q,!!t o/ru 

94! q!4 

9a!1 

9:!9 _!a4 

9:!:: 

E0ac$,otrd@o@ 

:! 

! 

1 

q!9 

9r! 

9!! 

i.Moos 

g!4 

gle 

q4€ 

q!{ 

g4! 

!41 

o$ qE !t!! 

r**E^s dD oc !!!r

n--_fi:E-----nEr o-r -.q99:---- 

'-r M*r oae rrr9]------c!l2!-----! : 

n_-qts-op 

i6----Ait-os-0a!$oers4!r,----!gC-----99r!i 

a-----ii*-----6t-0."r q,!!!r--- c-94:: 

E__---:r, 0.,,,! _ 

e-----iiti-- M--ql!L,!r9!-----91!4 

t--r o?e oer ! !rl---.9!:!--!.!g] 

ii-_ffi.tr ods !!er-----gr!r-- !! 

o ]5?! o':l ! 

i......ffios o$' r!!-----L!!1l sllS 

t---o_!ia-o $ r!!----l : 

6-----i;gi-----ini, 

-. 

0 4! S4L,q{1! 

;__nt-r.' 0,'* r!!!- l 

t--_--ni------r o0! ott oss 

{_ 0fi-god.e06| 

n---_-E-----ntt oE o.'r or* 

ffib.--inc]d r! s401! 0,e o'h' 9:!9 

i6-----68-----* .os dto M' 

6_M* 

i- Ma 6r q!s!----

lndex of Politlcal Rents (RPi) 

94: 

9,2?:! 

!491 

ggE 

95!: 

!!9 

9@ 

9gg 

g4 

92v 

lge 

!!?1! 

iEe 

!l!!! 

!]g: 

!!qE 

!g!q 

gJl!! 

q,l!4_ 

q:e1 

95:3 

9lsc1 

9l!j! 

!4:: g!l: 

ge3l 

!E5 

!4E 

!49! 

!4! 

!41 

_!4! 

.siuc 

!49 

!@ 

dF 

q!!1 

q44 

q9qg 

9,?41 

!!41 

!,:g! 

_!!4 

q::a 

rle 

9]9L 

9591 

!42! 

s49 

!@ 

!!:?1 

!,i9! 

!!!: 

94n 

@ 

glez 

gjgl 

!,9!a 

9,!g! 

!,!99 

g9el 

!91! 

!!3 

s:Eq 

!,!41 

of2l 

glg 

a-0@ 

9Z! 

o!!q! _qj4___JEg------!41 

i- 

:! 

g 

o|'l !^ 

sr:! 

dd 

943! 

orGI o@ 

lg1 

q4! 

9:!Z 

r sr4r qr!!r 

idEi-M 

EwM I ott osr qE! - ir 

iE- i' rE od 

a o9 o9Sl !l!q!,___! .!4t! 

!!!E!! ! c4 9g 449 

6F

o,s !99r----- 

t 

n-u -nJ|o-!* od ire ,----egr ,----9gl 

r o-iffi 94at 

60-n-!' u,r' rr4-- 

----!4,---!!lJ! 

t-or' 

---l 

o r'6 q! 

t__-i-qoe,'r!:r!--ffi===---_---.*o 

" d@"@ ,---f-oe' 9ir9! ss-s4j94 9* *:; 

6t0!-rl 06,,, rg_ -r--in--or6rs-q94-ii'=..=--=--EE"*o 

od, Nro 9ry: 9:3:" 

t-06! odr or' 0qru9 

r!L,c!2,--l!4 

--r-se ;i--dR, or r4I____ 

t-r ond ods rrt4-----91!!--a-----6{-r0-;*-rl4]-lc]ll-!lgl 

t-orr o{5 or!!r - 

-l@{l6d 

6- --0e]n- --.F@Lse!_ 

r.'rc*,1 9!!9! 9P: 

6i-----tti------5dr5qa-!lL- 

------.6,u-5ret-----9149__

lndex ot Anti Rent Seeking Technolo8ies (Ri) 

i--oEE ".4,--e'e "-6, 9::! 

i-"'d o',re """ 9!1 

ii-' M,q: M 

"d 

"ffi "11! 

ii--*e "!!!L M "d' !:= 

ii-'---o-. ".'6 '# "'': 9= 

, 

--04."@i! 

'ffinE: -JrL--.rt9L4!4 

ii--, 0,4 M' 

".'! "'::: o.E! 

ii--od,M,.m-r-!r:-ir9:i-----9!rl 

i--0.,a-eraL-_gal-,ie! 

i-, o 

"F, 

L o___9]!L,-!]4-9:99 

ii_--o* oi,re os" 9i!t-ssio@ 

--i""d"!e_sl4:-----sril--glli 

;--"*"r')s-19--!rgl,---9!:: 

';, ,,xt "!4L rnu---!P---:el 

i-"d: !4- eM "'''l 9f:: 

i-_--oo-"d'ffi.@gqll 

7-.* "vl 

-osro"',rco"dqq: 

-, 

s_ j]jj!-!4 

i ffi-oil1, --!t!l 

r;_rrs c* 

".,re 

"tg 

ii o--di rL o_-q:!r_ !4__ :l 

i-os,, oarr-0M 

ii oq! ,.91!g- 94!L---!:1: "d,919 

i---sf od!,-q!g---19!r-,-srl 

ts 

--oed 0* o.i-!4 ---!l sire 

i:----"* 

"*' 

L* 0d 

d orD o€! o.u, """, od 919?1 

it----i6rj--rr'r !-- - 4 

!--o*D olq !9,----!9- -!e! 

ii--o.tr0,:rr--ql3r j-----!g!.:-,-9ig 

oir! odr rr1l 4!L,-llgg 

06r lltq:_- gl:]_,--gje: 

t c$4 

--trd ---.slg- !,!g,--s+e 

i- tr-o,rs' l4s ! 

r--odi o -' s* !!!s,----.9-!::L !El! 

n-----itr-----i 

*-** " "'"' * e4! !i'! l39l 

------ii-{ilrp!L - st9r----.9i9! 

i-odtr o 

'd -!!!!,----.9l4-q!l!! 

9r!rl,--!.19---- l.l 

n-----dii-----iE5 0!6, o's dd 

-, 

-6r

---tu, os !l ----9j4L 9.:!1 

tt----nM o,,rl o__-rl___--!lri----! jl4 

iffi@-!r4,--9+ 

it---ols od ffi 6n oq9 

i6 

i-,---0,*"r!r_q:s--4u4--+li 

"--"* 

--o@ 

-0"b !p=!!4-J4---1e 

i;-.6Eii-M 

ort --cI 

o.ra _!nL=j!L j+ll 

ii-ii-- 6si-d9----g:!!t-----lj;li 

ffi ;-*-"4{,!s._-}!!----jj]?* 

--"-, "4 d, 't!-:lr-| 

"Yi !!!? 

v* .ai 

i-Nso*,u'fl5dgltg -J:l!--JE!---:g 

;i----sF 0-s$ F4 -llr!!-,--!-9ll -+-E 

ffi 

--4 

"4. 

----@----er!--49 

,,? 9!4

Index of Property Rights (SicP) 

6 a'--id od oB os, glel 

;--' "* "sre" ""r91 lg: 

,-t *' rE- -r]g!-- el,g-:4 

i--r-----oEi@----jg-----ss 

';- : 

--uso'4r,--9L---lP-,-:g 

t-ory",!!?,--JE-----!94---9gl 

@L:4 

V--o^""4]L!l4---!8-,:+ 

;?- 

'-t --o*vaI__!!P-----9::!-:21 

*,n 

",4:,---!JL,--99r- :Y 

ii-Ds 05, .4 @*:! 

aa-'--orm06..,'.94!! 

o5$! o::g 

;i-o,n o* 

ii_--Mr, oM "4 N od d!1' 

o-, ds ds ory "d 9'l! 

n- og o@_eq --99 

- d-r d!!!--ll!L- sg!---- 

d_-0r,o$nffi:0@ 

i6 os'! !9L --.9r9---Jl!l! 

ii---s," 816 rlg -.s11!9,--14! 

:--oG a:{ rrE!- ggg,---lglz 

---o,r o&' r 44------9Ie-,--9ll! 

---Drr o ss rlll sll 

-- ni:--oo.! !:: 

b--i- N 0:::L -!l!: 9-1!l 

-u,rodoGo5s@ 

-6r,

_ 

o r. t--qrs---s-a!-!r:! 

ii---ozro!!L,!ls---Jl9q--9lll: 

--d6 

(ffi 0r!4 

_-str&-

lndex of taw and Order (sillil 

i*i@ i-"-6"e,!rs!-----!14-,-J.!14 

-----ns--"L9:g-,j!!ll-9l.: 

;-oa o&, od os! qlli 

ffi_1::!t=-J4 

:i-"s ffi o@! 

",'a 

9!+ 

;. 

--os ooi- so9----jl4l 

ii-o,, oE' 14- 

--!:f! 

: 

-- M, rl!! olrl 

:a_---Dd od6? 91!jL,---!4L -!e:i 

, 

"@ 

-06,: 

0s-@9!4-_llE 

orrr ----!lr!L- !i!9-----!4! 

i-o!n o4r!,---llg?L eie 

i--d oar ral€r --114 

----g!ar 

n_-o,tl0'loD,oL.on 

o4a q4L. !4'! 

-osa

a ox,l !44------!L !J9= 

ii--oen ud !a------grl !ll!? 

:" 0e 

-ms 

--od6 r!qql--- -- 

E--u!, 0$r _!ll9-----lr!3! ,-1.!41 

od' ire !$' 9l9t 

6 

--os,oE4____gqa,---rr9E--,-!!* 

i..--"@ G'4 ,__.9e!_ ,-s4!----sgll 

-d* 

ffi-o"*d '. ""- "".: ".!::t :il* ;#' 

i-o,, -dq.5t____s!r!,--!-cE-,9+ 

0"!- od- 

, 

--!r:L+1!4 

---0ry 

d- trq ___r,!E ---99

lndex of PolititalStability (Sisi) 

"--' 

;-es--L",f, rlsr--!4E----99! 

0 ,* ,!-s--!,!!----94 

ii=_ffi-;-4 --.9!::- g 

i-os "d 

., o'!9 9i:: 

it-..:'--"d dq 9!!9! 

",*" 

tiod -!;' mr,-lj:11-- : 

;--, "4L!E---!9,-:P 

i;- ---os",rqo---j!q,--!l!L,9gf 

;--026 o,! 9-!!!- 9r!:,--9e 

i--o* oN rs9!-,----!9aii--"d 

q.a -!gI 

"4 

o$r 9t:!! 

i@ ir -_n6--, oL d_.g_!j__ ---9!l 

ta-_--un_----o4!q 

;t-0", 0.! __.9.!E_ --s!!l----lig 99r!,--!+!l 

;: nr* --an o6s-----!!!9L -9,!11! 

n-- de-der odD ral gttc ----isr: 

i6 nffi -dt 06----9!!9--- 

!t--_---E----EiE r!:L!e! --! 

|,o-@,oi!Lo4-----jj!q-,M 

!i--de orru orui 

,_-os 0$! 6 0Fre9 

n-tr6ffii 0.r, !!!4--ffi@n 

o,{ jjqLgl -.s.i?? 

o4 r6re--rgl 

i--o o --.qs ,r't 

,!!_ 

rlrll 

91L"- 9l:!1,

-_=-i;i-M ---D a!r!L qgr ,-ll!9 

oo'r os?,Lo4, ig9 

ii----n6 ----sl1!Li!:1,--!.1!!e 

!--dq6 osr l4 ---!4- l 

;---_"----otE-nd---,99----i=1 

;-----Gs -$@-!4:!---!j9!1 

----o'* F.' .ru olG 

ii-- ol2 6i@---9s----- "* sl 

it-_-a-,i os! ,- L-!!! ,--! 

_!r!9 ___9is! 

a, .s--os qlre----- ---94 

;---'M-'--adLMA asjt ll44:----'9.4t: --:ry 

-E-@_----nfi-_ 

.i 6 !ta----94----!4 

;i__i@--.@06r1-L--ll9l----J4l 

;i ----oje o 6@,,-lliei"-m 

--oe! !!s--- -- !!9 

ii-trd o*, oaB d!-----J= 

;i-am oz* ] a_ , 

;-@ 6,rL dd o4'" gryi 

ii__a---* 

-tn "*s rd oro 

n--Mro4,!!s--els1---_9q 

t----"=iii o'-_._4! -q49 ,, s 

ffi.='-_=--|* . ,*' .*, ".s l* ;*i 

il*-* '. * * ee: :e *l::

lndex of Rlsk Reduclng Technologies (Siil 

H# 

6 dii--o ,!s! ----r j4---!lE---- 

_-6 dnI 96 

i--- -a-@'@--]r9!----ly-,-:4 

"4!L "- 

i-!c q$ 

''I o"f 9g 

i-od-"@=-gr8=l= j:4! ---!):!--:= 

'----;F----nrnl 

;-tii" o-,' 0d 0,. 9i= 

ii---;ii---@ !ls-!j!: 

i-.sd 0',6 odto 

"d 

!:11 

fr---'1fr---niE 

;-o." 

--!Pr--l+ 

"!4L 

-o*, 

9!g----J14 ,--:+ 

"-, "*" "-4,,--!:g- ,!Ji!----P'ii....---o^"rrLj1:!L-glg-+g 

ii-o& o6]a ____eqr ----i.e+---9:l 

i----osro*it,!-------!-4:-----!Ej9 

. ,'* ,".:l "+ *# ffi 

ffi 

;,.........'--"." "!!rL 

-*..."",*".!e::l'::1ii*;# 

,u! 9!g 

Eii;i----=' ----.'==--_-.......v^*--r'-q!!s-]4-9g---**--*H; 

,-o.."q,rfr-!il-!lgl-=+l 

-"eM4,__!)!_-_94---:e 

iff"."--* !41--es 

;'-..==---, "-. ",6' "* ".:r 9ilg 

i--M," "!!!L"d 

o.! ::* 

;-"s "-! "d "ar :'ii--;:--, 

0,. Ee, of os 9e.: 

ii--is----0tu4 

ii--od --llL,l+: d:le 

"qru 

9.e 

0*. ""! _eE!------9r4-Ji4l 

ffi--" *, * 9,]4 ".=: 1?* 

b--orB odE l-- --- +! 

,tu 

"," 

]g 

--Mnt@,__J]44---9:l4j----1gj' -!.i!--- 

-0.,",sffi04?*l ffirls--=is1? 

i,-'--oer 06rl o_-g_erl-ge! 

; ---;;; o-ti- srq------ge 

s-----ts g:g-----!rE--- -!jA ! 

-os"-s6oe9=! 

i-!Bo,,q_gler----9s-,-Jg 

;-0d,-"sr1 "-!:4-----!l!9l-jlg 

-, " "* -or,! "- ee: 9el 9gg 

;i--odoarraE--g:g-9tzc 

;t-trzr o 

--'--o"^ 

di rl::l : 

dr r_:ul ,-llg-!gl3 

i,'_--n:i--!rE ond 04t ,jlL !g! 

-- 

#fi#+*-- ' *-"*,-lf!: ";:;? **

]L 

L 

:L 

L 

!L 

L 

!!_ 

J- 

2_ 

4_ 

:!_ 

::_ 

q::!i 

cg: 

qs:g 

141 

qlgz 

qje1 

_941 

a,@ 

!93 

!4! 

lga 

!g:1 

!4:: 

!!:91 

i:iid-.d d u 

' si rlq q4:!-- i1 

!!4!L- 

('|@]ffi3iiE6oB 

4 

! 

:l 

q!4! 

9l!s1 

g33S 

Ll!! 

q:41 

g4l

lndex of Institutionalized social Technologies (panel) 

2002-06 (llsr02o6l 

=* - F zrot zoor 'ot ms 4 

!E!gg- 

!s144- 

!91s4!4- 

I4!E!99L 

9t!!4__ 

.q 

- 

1 

:1 

zq 

e 

-g 

lq 

!! 

4 :q 

ddq0d' 

ggl! 

q4g 

a,lJl4 

g!!! 

!4t1 

!,i!! 

!@! 

9:!22 

!4:i 

9!!e 

!.::g 

gle 

9i!E!------S!41 

!4!?_____it3:t 

- dss Md 

ffita0a'MqMn 

9,39: 

9?!!1 

q!9:1 

!!!: 

!,!t!1 

!!!t! 

!,!E! 

!e!2 

tg4 

egq 

94g 

JlZ 

949 

9!Z! 

qz4! 

!,3E1 

g!1! 

ljat 

9!q 

t4 

gec 

-!:!2! 

.s,4E 

gg! 

!49 

!!:91 

!lE: 

-g9l! 

ffi-ffi 

ffi 

iL ]!lL rg 

nfii------nad----o_6iii;i-----niF----nM 

------iE ---3tt 

;izi 

i- ns niB- 

i6n-----n6-----@ 

**iii----iiffi 

t0fus 0.t' 

0\,q 

orrlq lq!ry 

os 6q 

- 

!!119 

q!2 

qgl 

sgs 

q!t! 

qtgg 

clcl 

984 

q!!e 

s3tq 

ji! 

glsu

6u. qal-qgrl 9:e 

i---r'-ory o s onl----!15---- 

-os 

n- o-j--oi,,!!4,----!L!44 

it- ott--os r!!9--- sls9 

d_ M-i- -os qrrr ___ll!!I---ii----ffiol4 

,.s-4!!rg 

o^r oa r% 0a-!4S 

C___ntt-o)'r !4! 

i!---ffis s!!4-9-4!L 

---- ---j4: 

! 4l 

-'. 

_qe

Chapter 6-appen x R: seBltlelay Analysts 

Wci8hling Esine enployed in Uc curenl studv index is bos€d o' ov€mge valucs' lor 

chcriiB s.snivity of itulex vridi Eslrl ro *eighs tris nudv enPlovs a detrilcd anrlvsis 

amp.rinB dk indi6 6lcuLl.J bv cnplovi.s dilTcEnr weighting Egin6 Y@ 2006 vrlws 

!E 48rcsrr.d in indi6 *irh *cienB bG.d o followins w'ighrins Esid6 l) Easl d ad- 

h@ opp@h to dE rcisndng oa vanabba on $en Elarirc initrtoe ii @imic 

p4rloddce 6 the lmher s{.s il 2) Da$d on iv.mse wtignling wh€ft lh' rcsrch't 

s€ishred dif€rcnr €nponenb of rhe lidcx eqltnv l) calculai'd th$ugh principil 

6mponent Mlysis (PcA) bced on 2006 vllu.s lnd 4) cDdcnl weightins Egim"mploving 

I'CA blsed on av.nge vald.s 6 ued in rhtu sludv Tnus td @h onponcnt tnd $b_ 

cootoNnls of insiii'nion, theE would b. folr ditTcF indi6 Fd @nra s of lhe 

i lies, the Ewher €mplolql buh th. PoFn @Nldid fld rL Sp'otu R'nk 

(jmlllim. Th. 6ulb 6 dcaicr.d f'm T.bl€ l0 dDw t vdv hiBh @Lrion b'l@ rre 

i.dici Boti th. Pdlm dd sp.m. Cdllrcidt c hisn ad Fsnirc.!d tppmxintlcly 

thc en.. Th. tvemge ml ion caaaf,i€nt of both Pg'Mn and Sp'.md monS itdicB is 

lhout 0,98. Mo€ over dnd tll the indi€s oe highlv slrtiauv siE ificdt Gi8lificanl l% 

l.vel). This shows .hot vei.blcs !g8tu8.kd in rhe index rhroush emplovi'g difforcnt 

w.i8hlins EEiD6 Nould off.r sinila. Multx $owios lllrt indi6 ntv nol be msh emniv' 

1o vlridids in the N.ighls. Hen@ Oc rcsulb nigh b€ hishlv iMitive to $e choi@ of 

*cighin8 n.rhod cmplo)td- Sinild cmhsion it Epod.d in (Cffiv.tr{t Lrsq 2003: 

Krufndq Knry ed M&*l@i 2fi')6, 2{Xt}

t./lh 10: Sdliltt tD .[d'lt$bt lte.t eta) 

- 

. cerdm k liprfi.jt d rh. oor r.vd o..r.dJ. 

5 k$6 6@d by.inr&.rhpffit etFB (rc^l b6.d d ^6.a. €rc ol2@s Fdod. 

6 rnd6 4r.d by PC. b&d d e €rG 

t krd'6 bd 6.dho.'3 36ldt jud.aar :h v'i.hr.s'd'dr rn9otn. 

3 relrw.thriB dr$i.br6 D.ra e r.m *thr

ChapterT: 

: 

:vI;Ai ",,w::*,*""^",,"s6 i.:: : rx:H,. ;i.: I#' fr #h" Lr:f ::;::T 

)îiiii",,,*", ^",": - 

;t;;;; 

0a ie\ a' i*i!@aor2@'D.b, rzLhno,,!,e' t@$ 

'; t,.l.@,, Na.t ^ntu'iaotd'd ssnt 'ahrctoaE t*Ntt 2002 05 L otuotd 

ri n*,'i-n- "**t , -*0. 'r 11' @lhnE os @nF 2d b 

-*hG 

Indey of Institutlo[allzed soclal technologles 

(cross- sectlonal) 

t^d,". A. .h" end o *^Poi@n with oth't najor i^dk's E dk' pto!@ 

ln rho pierio0! ohqprer, instiluliontl covdge ras li6i&d to l4 lariibles duc ro mavailrbilitv 

"a(drindo6 

drb ol,iv. y6 llow€r' 

lre 6s @ndftion k dmPPc4 ! lot mN {bb 

sduMs cd b€ qulifi€d b be included in index M@ovor, inslitutioNl qualitt h obswcd lo 

ov.r tirc hc@ dFDping tin cficlion niAht Dd mtle doct' 'f ' difcMe 

To @piLrlirc on thes hug€ tolumd oi ddt, lhis chattr esles rh' i'd'r or 

in$itutiodlizd sisl rehmlosi.s oveiia G. oo€ d'b $!6 dd indic6 dd 

enDloying simils ageftearion lid.sod{ 6d objecliv. weiebting tehoiqut' This 

'€'r 

r'rsir' ind.x sives crN stidnal cstimles of innilutioml quftis of 14l @unfi6 Aboul 

hundrcd drr, src d cmploycd im dh ountry lnd lh€s !rc lSgEgFt! inlo l? indi6 

n.osurjng diltc€rl sp.* ofinstitutions. Th. tditbLs c i' ft. lm ofa*636 @venng 

$c Fiod 

oa lo95 to 2O0s *id' M. wiablc avmgi4 up to l0 t.s wfiil. Mc G sinclc 

yc.i esr iror.s, d€p.rding on lhe availabil ity of data This index is oomParoj qnh olhs nrjo' 

i.di6 Tlr csulb indhilc tiat lhis inLx ori6 a h4n dese of mlation silh cll indi6

flgureT: tllerarchld ondburron ot 

Indl4r, cbs s'dml * ..

au. 11: krc?tbn.4 sub tnck . ct6t dtoaol tda 

l!!? 

!!9t 

hp.eiB 

€lelFa Hrrd*lo Rdn* 

F'ltfu h d.d.iN.r @fn'ar oiE!! 

s,r4!l!,qtr]!!!!!!l!|!l!!9! 

tutu. E t dlv.n-!!e! 

ctfuEli.di-{a| 

9..1,8.h'|F€Fw 

sf iid. auaresio{E bud€$ i,er-R.nl( 

6Eii6-rBushes{orittu.ri.s'ind.r_r|m 

s.njmffi6{'ini !iti6 i'n'_c..r {x 

orin@ft Fr 4b) 

qul.llon ol .^bfTh. iutr$.r of @6doE. 

regurrdo- of qltryadlt n. s 3h@ o{ p.r 

@il.cDP 

d@0d}Ed,lbcsq 

Pub[. s.dor Ethr6 Ind.r(PtED-GCR 

EcmlddPgopdFn|.d.x 

c@rd Eskr lnd.r.GCR 

rypeot E .|Mic org{!4!!q 

k .dm ol ftnd? 06b..s:nd c.oo.€rl6 

s,! 

qt!

M.*.r Orod2.tdcb.rd$t!44naur.tot6tidlons 

o^ rh. 5!1. or rcal 

topedy 

e4r!t Qeg49! @E!'! 

arnid.trs cq4a4!!!f!ry 

asha LI..'E to -n R.ltftffiH 

rlrdor,!4ltlllgGoP-sd'rls 

unoricFr Eqelllqtllll-- 

!!!l 4!!!!.ftd Fmuh_-- 

EEljr a4rq!{q- 

rr.ts. Aaftaav 

t€s,r enloffient ot @nrads 

E !q@!r a!484E!!!iq!!!!!!14€E! 

E b.d.{ cdlE.erm (4}4i!D!r.JD. 

Eilftj.t,1ocoiF,.r}cor (96 .a d.hlidis 

Pded.ndrnrno tY6hd€hdd.E rde6e 

l.ctor{mhontv*rk ) Frct 4l!q!!t!q 

Ft!..d6. or !.DF.j!@E4! 

- 

s,tl

{etd) 

{3IU} 

lU! Eleq*l!J"d.id*Lrsv 

Effd.d ol Loal tr mNt WEF 

-- 

rrr€srh, rtYnda!l!!!!99!lEEl9! 

rldiad.ni.BttiLrDtl!! !'j@ 

Ed-c6lud..bdddd'|5. 

mEr.c r'!bo.t Rh!!!4q 

oE-E d q4! 

s4rn6s @rb of dme .nd Molenc 

mdr b.d€dDrs SlPt 

Mrrh.ry t"t.lf€rcne rn ru|. i, law rd the 

pdifu|p.o6 

sbdDrv ol o.dd.d. bnhllqlg 

o.La

7.2. Me&odolog! 

fiis slis fdlss on I ) in&x d.eiptiotl 2) dd, eurr r) AEigrt€lrlion nerhodologv 

7,2.1 D€saiption of Indices 

compuradon oflhc,btlowine indies is ric$rib.d: 

thth' oI tntdnnloMltc.t J,ctol t4trotq|'s lcteaddol Qtsr) 

This is s aBsECa!. cms MiioMl intq @nFisjns ol lndex of Risk R'dwi's T*hnolosies 

lnl lh€ lndcx of 

^.ri Rcnt s*ing T6htulogi.s (se Figle r) 

7.2,1.1, lr.tdo! NiL t.ttscner.dtuLt/d (9ll 

Fid @mponqt of ins Dtionali&d cial |chnoloc' is @lled risk tdlcits l*hiolo$/ As 

explain d in pEvioos ch4rer, n n6UB ineiltriout ,msmdls lhstr'dE lr'nsdml 

isk- lndd ofnsk educina L.hnologies is divided into folld*ing sub indiccs 

!) co n t dfoum sd FoF.fy 

rishls b) Justi@ svsh c) kw dfo|@'nr d) Poricv 

slability lnd e), Rulc ol law indd of vorld gdvmdc. indicdoN. Thcn weighls in nsk 

EducinS tdhrcroo/ ind.x e 2t%, rq ltlq t2% 8d 26% Espcdirclv Ditrmt $b 

cmpon.nrs of lhs indlx ofn* 4ducinB cohDologv e bri.flv 'l't'odcd b€lor' 

7.2.1-r,r hd.xor 6tr d-!ft.smirtd DoFrY dd6llrdl: 

fih Index of contnct enforcedent and pop.rtv nd ! coftins: !) lndex of Cotr&l 

Enr6@mdl d b) tn&x of intsin€nl lnd li@id nshs F@lid 

hlving caul w'snte 

7.2.t 1. !. ! t"&t ol lbttalLEubElarrL This indsx epluEs indiceG I ) e.forcement rank 

.Bl 2) lim sFnl br busiess in mr(gmdt of onltic|i r) oroMcnt os! 4) Drblic

conard.nc. in ksel stslcn, l) legn! enfo@ment ol conlts|s aid 6) Conh'r e'forceabilitt 

indcx ol BERI- Tnen wishts e 2l vq l8./., l6vq 2lvq l9% dnd 5% respeliv€rv' 

72t.!.12t^+te[!4!!e4 

cFdilo6' .ighls pnt€€don, int 

'ldrul 

d4rdThts i Lr o@ tndrcdo6 ol 

pruIEnv dghs pdlstioq inwnc' n$s indcx md 

index of pDpeny righls wilh weighls ol2%, 34vq 30% dd l4vq resD'cnvelv' 

7.2.1.1 1.21 1&r !Lp!98!E rjs!!..this elb itd€x or ifll€r of inv6hfl1 md findcial 

dsl s prcrelion imlud6 indic.rqs lion dilf@t suEc" nm'1, .ltr)l@ic n6don of 

Wdld (t!w), World rsnodic Fmn (WtjF) tnd He'ibge Food'lio (Hl)' Bc'rdso 

tE6fomation index (BTl) with weighls of 259q 109'q ?6"4 | 99" rcspdiivelv 

7.2.L!.122. ito&' ol imt@ .iatts: This tb indd ov6 indi@toB p'nlindg ro 

pst*lion ofminority shehd&6' inledsrs gcmdl inv.sor For@tid, 6 *'u a invcstd 

rilhrs ind€x orzlt dd Knluk(ZK)(2001)whhweidtsof3Svq2{%,and33%resl'eotivelv 

ti.r.u hda d!& "dn |tul: 

Ahir ompreh.sive ind.x ofjucic. $dcm nes6 judici.l pro'siontris, i(lcp'n&icc 

efici.ncy ond inpaniality snt rfordabililt speificallv, n is 3lb_divided into !) lnd'x ol 

Judicial DDfe$idclis b) Index ofjudicid iidcp€nddce c) ind.x ofcfficie'ct ofjudiciary 

md d) l.srl stcd imp.nidlary ed lfordrDiliiv wirh wcisbre of l6V\ 32vq 2t tr%' 

Esp.rtilely. Thes indic.s e tudier exDlaied b.lo*: 

7 2 t t.2 t. Llde of Julicid Drctesio4litd: This mlets l) a numh.r of pMtdud aclio's 

Equnld unljl dE 6fo|eqt oaj'rdgnd.nd 2) indq ofjudge.nd hw'crs' with cqul 

7 2.11 2.2. Ihlle, of,h.ticlol ituLbeh&Ne: '|nh .g8Fgdtes diffeEnt judicial independene 

ndu6 fim dilLEnt 5u'u lrmelt wFE, wEf ,nd b Pon ct !l (LLPS) (2{XX), {ih 

*cilhk of4396, 4396, .tn l4% e+edi*ly.

7-2 t.t.2.3. ttute' ol.frci2w ot 'uaicin: This indq includes difrednl judicial eficieN) 

md!€ lilc l) 1,. Don! d al (tl-s\4 (199) a Emciocv ofLsll fr!rcmrt in&x of 

wEr, alons wftn 3) p€opl€ i*s !o junice, 4) index d"Ibtorv tim€ limits od 5) dumtion 

Eom fodgina mFpf.i. 10 afoemor of vcilkr, *itl' Misl r of 22v' 25to' 21qt lA%' 'trl 

'TlLThis 

sub ind+ .SsEeares dilI.EnI 

i.disto6 otlained fod sude)3 of individul tnd busims Ellrdite l) inp3rtillilv ot@uni 

2) iFslle Fymcntl mod€ fd ravomble jdicial daision. jusli@ 3) afrordlbililv 4) 

coristeNy, sd 5) hon sy ol 1.8!l svsem 6) iid.x ofjudicial svsrd bv 'nterp.s srev' 

and 7) cqulity ol cilizns under law and eN ofcnizons tro a Noniiscfihinliory Judichry' 

fi.n rcislib e 16r! l6v. l(l,/q 1696, | 6%, I2'lo. and lrl% Espelr*rt 

7,2,1,1,3 r.rr€x ot r..w hfo@hd lslul: 

ProrEr judici.l sysl.m sho d b. lided wirh.li&iive low..lo@mol m4honisD fd lroper 

enfoMftnt oa pbFny nghls. Tlis cmFlhensiv€ ind.r @!m tsious fa€'s or h* 

..foGme rorlbly l) Ttx cvsion, 2) Rist or cdlisrio., 3) Relidbililv and 

pbfcsioElis oa polie ,id 4) o$d law .nr@tu efri6 5) TdutE, Extnjudicitl 

Killins, Polilical hpn$mcnl, ond Disptebde indiootoB 6) Orsoniad cdmq 7) 

B6inc$ ds of crine rrl violdce, 3 dd 9) 'n*it l@s Their *cights e r2%' gr' e 

996,117q llolq 16o10, l5v. ind 12%respetiv.ly. 

'nd.r c. F&r dbrr.y {sl: 

Is. ofpoticy insLbili.y m'inlt 'iss b*!ue ofinsbl. political innhdid. 

This compde.l of isl Educin! &ch.6lo8, eveE i.su6 rcnsd in lh. inde{, such as (l) 

Exedire consdints (2) Milir..y i e.f@re in olc of lN ttd lhc politiql pIlB .nd o) 

stlbiliryolD€m€nrio Innn(ionsw n *igbkof 38%,217q md 4l%Esp@iively

7.2.2, tnd.t o, Antt4gnt e.klne le.hnoloths (ti) 

Prcdabry Enrs can bc glin€d rhrcush weat inslitutionaliztid ol risk @d@ins technologics 

thi1 .d€re l@phol6 in inenidiv. d *ek insrndio's nrt index feuscs on l*hnololics 

which hclp6 climinst $€ tin& of dr' A@rdirylv, it is eMividei inb lnr indbs 

nloely index of Inelitotionll Ents! index of Policv Ens ond index of Polili€l Fnts aith 

w.igtr of l5va 36vo ud 2C'lo 6p@liwly Bief d.eiptionr of diffmnl sub indi€s aE 

7,r-r hd.! of lr|iru6!.1 R68 (Rii): 

Tlis ind.x erclusilely fau*s on lhoe rcnb dlt di$ duc lo {4( inslituios Pro ding 

d.til cov.dg. of diffmt innituliml w4kne$ in terricule, tnh ind.x rNuss on a) 

R€slhrcy od Bl@lelic Uffrciocy h) E e of doi.g bBi'B aJd .) C(ftFriotl. silh 

w.ishls ot l47r 32% a4d l4vs ftsD.ctively. Sumdary Mouil of@h h giv.i below. 

7.2.2. LI Rco'/ltufl rad Bo.tudic E6.i.n!: This indcx feus io @surct diis qulilv in 

teins of 1) blMdmy sls lnd 2) hindtuce 10 busincs, 3) farotilisn in dechions of 

sovmtud otrEi.ls 4) hliLn of spv.dndr Esulttio lri Cov.nmcnt Etrdlircn* 

indi€s oa5) rCRo,6) BERI ed ?) wcl, *i6 *eishls 6r t4v\ trA, r5%. lt%, r5%,t6%. 

7,2.21-2 EBrdtui4ElBjE t:'rnn in&x aaB all tiN i.sritulioml inFdindL |hrr 

pEvdr so@rh ftdioning of businds. SFcificllly lhis index fdns on l) R.nk,2)Tim. 

({hysl l) co6i (% or inm. p.r dpin), 4) .st ard limc ind.x 5) rh. numba or prs€duEs 

6) dlning I b8ircs ind.x of EFW, ,) Eguldory qulity indq of ICRC .nd 3) bBiBs

6*doD ind.x of llsit se. Th.n weaghis ate l4%, l?96' l2olq l9vq 5r/r' lsvr' 8r/'' 'd v/' 

7.2 2.1-t t@d. t'tbt oI coftdtup: tlft in&x is 6dns sMi d'd i' o t) In&x or 

CmFrion, b) l.d.x ot Bnb€rv aid c) In&x of A.li C@pri@ Enfo|@dr w n eishrs or 

arq, a.l'o ind | {q4 €pectiveD. TIEE &bik e liren belo$ 

7 2.2 1.3.1 th&t otcotuption: flik consbs ol indi€loN measuring co'trol ofcompti@ 

nom diit E l su6 'ite t) derpri* $@v, 2) opeiiv. 3) LLsv' 4) lcR6' 5) BERI 6) 

Tl, 7) wcl $d s) poblic ad 9) dFH. siE 'd'ics id'i ol clobal ConFiitrcN 

Rcpon (CrcR). fl*n ei8hts e 1'/\ t!' \e/a lrv\ rc'4 rtt4\ tt/q l2o/a tnA lt'A 

7.2.2. ) 3 2 ltule, of Bribetu: Ilis indsx exolusilclv feDs on indicolon rGuring e$tnt of 

bribes or exl6 p€ytu.nt giv.n lo oanchb lo s.l lh. wo* dm bv busind 'nd individuals' 

ll imhd.s I ) lnfomll Porft.r b FubllJ Omciols 2) EFW bnb€rv i'rL" 3) Plving Mbd 16 

s.1 rnh!5 .ro.q 4) Fri.dnsn eL .l- (FJgx2o00) hrib.rv in&4 snd t Erpods bdb'rv 

indel fi.ir rcigl !!rc2lvqry4 2tr 23v\and23'/ot6r4rtctv. 

7.2.2.1.3.3 l:nle, ot tdt Cbnwtion Enfbtewnt: Tnis fdDs on captcilv or l|!le orgs lo 

enrm Anli oonplid ncoEs lhh pcrtlln, io I) lar 6 well62) cnforc'meni 4dcics' 

Tt'* @ wirl'r.d .qully. 

72.22 Itu .t of tulLt tu (Ni): 

Thed sF also mE thd si$ Nh.n govinnent follo*s pml*tionist policv cEaring 

i..lficienci6 by potecrins in fioienl6ucine3 This indd i subdivid.d into a) Ind.x of 

@npdirion .nd Dotlct ms b) Indei of l-i6s.s, p.mib $d Es1'ictid c) Prie Mtrols 

d) lodd ol Sh.dow my !d lr|cx of R.gutrby qu.rq ukd fin wld s{)a.ll1.re

indicarom Nnh weiehts of 2lvq 20v", 1594, 18% sd 267q E+cctiv" Fudhq detlils e 

Th6 ind?x @*N EclMtr o4..iariotr 

tnlensiry of l@l @Pctitio, Ect of n. cl domil,m bt ld plavc6' F@dom or 

Priwlc Busine$es and Coop.talives ro compel' in Mdlec' 'rrcnt o' markel lib€mlit'tioD 

dd govoodt oMcd buiis it nsrt tt TlF* !E weighted 2Jvo'|te/' 21v' t4v\ ad 

7.2 2.2.2 hdd ot Li.ews ftnits ann e*tutkn: Thh sub ind* ol Flicy Ert dggcg0les 

ardioloE meNrinstdminishtitEquircmonr busindhavc ofulfill'{hich 

Regll.rory E5tictions on t||. sk of dl poFlv, inclu&s Eloding aquimots s wll ts 

Fgll.rory rcslricrion in ob|!ini4 licen$s, consEuc.ion pedns l sl$ ircludcs tnl 

idcqull iiy 6 il indic.les po licics favoing el iles. ]lEs vd.bl€s !ft weighl€d 9olq | 6%, I 6% 

ZJ24J& d S@w *"-*, rhis conponar of policv mrs indidG 'xt'nt or 

infomrl Mnomy. l.fomal or shadow stor nom.llv rhiv's wh'n th'F !E l@ hNh 

@rplidE od EsDl sy hind@s lhll dclc6 rall bBindes dd sbn_ups' As a Boll 

ilEy pEr.r ro Bo DEpod.4 lnd p.ErH eMy.ftrs6. 11 irclud6 l) FnN omp'li's 

asainst unrcsiscred 6ms. 2) shldow econmy s % ofCDP l) Umfticial E uomv indcx of 

H (Z ind 4) bl,ck malkd pemiun. Thet wcisbts e 9vq 29dl., 29% ond 32% Esp.clirclv 

,.2.2,i, l$la ol ?olrL.l Lnt (Rpt): 

Th b index neNcs th. cxt.d or pover SiveD by idnudo.s lo pol iiictl anthorilies Powd 

*ithoul @bbilily lnd ch.ckr wuld o@e M0icl of i.G€n bdren politiql 

.urhoni6.nd l|ien @6titl@is. This i.d.x is turdF dirid.n inb: (l) Indcx of Poniql 

Account bilny €) Indcx of polirical pnnicip{ion.nd @p.titih.s (r) Index olcilitn

Rights and 4Index of Voie qith *eiShls of tb.ot lElq 2l%' 179lo 

lhile reighl of 22vo is givcn lo Voie and .6ouhbilit, index 

122;J-Jt!!!]-!I!!l!84-1!r!]Pr!h4!4: 'ftis index covm dir*nr ispet or pubrio 

!@unlability. spcif@lly it ove6 l) rl* Dosibilitv $d ltw pDvid6 lo hold lop 

Sovemncnb om€ dll minie.u !@unisbL oa ft.n dios 2) txtd ol Public dielNE 

!tuI atsntlbilily of pftliimcnrorims .nd whe Er coun c.n underrdk' juditial €lies of 

l.sisl.lixi l) .fienY.ns of dE otrB ol dbuds,m, ed 4) dditor a'ftml q olhcr 

plblio amu .bilitylsocies ften weishrs !E 23iq 2994 t67q dd 2Z' E+eliwlv 

7.2 2 3.2 INkt ol tuliti@l MbiAtion dni mnntiti1eresN: fhis indd nGuG lhe extnl 

of politkjl cmFtiliwtr.ss, l) ru16 gpvcmi.s chief cGuiw Edirins ud 'ledions 2) 

l.vel plrying fi.ld tovid.d to pohicol plnicipans,3) foirc$ dd impanialitv of el*lonl 

p|l:|(:tss ed ,4) n*lm to cnlrs. in po|nid eivitie! 'fi'n {eiclt' e 2ttn' 24v\ 26%' 

7 2.2.3 3 lhae, of CiltalltLa: This indd Ms@s l) th. d€nr oI freodom PDvided to 

cirit wi.ty dsrnizlioot ud D cnias' -6 lo ed.nmor i.fmllio dd bcaic 

govemn.nl rcoords wiih a E.sorbl. tin p.iod All eb.@Fmls * w.ighl€d €qulty. 

7.2 2 3.1 lnAd ol voice: This ind.x n6ues nenom of s.dia and p@ss .s well s ti!.dofr 

olcitizN to sie rh.ir @nds, Civil libcdi.s, ts.din .rd F* n*dm !e rci8n&d 1596' 

10% and 357. Ep€civery, 

Figudrivc d$riplion of ln.s indi@s is pbvided iD FigrE ?, *he@ dMipnots ofsb 

indi6 .E povid.d in hbL l L D.bil deiptio ol rlEir d.r. $uMs is iNlud.d in

f.* xt: t$.n6 of ltdtwtu pa cNnt, @d l, d6bn ot w

Ri31 

fdr. t : oeeierr. stod'.'6 ol vod.rtb' llrdfttlEd) !t'd hr^' ffi 

Slrlrt

Rtt3 

5illi2 

5illl5 

silri3 

siDiS 

siui6 

Sitildi 

SiUfi 

siDli 

sil12 

sirL3 

si|r5 

si|16 

sitLT 

situ) 

sittl

7.2.2 D.ta Sou..es.nd Descrlptiot 

ou index covqs l4l @unlics, enonp!$ing nost ofwond populolion The sludv dmrlovs 

EN dltn 100 dt6 sl)llB p.a!ini4 lo th* dutrd in rh' @nnnctio of i'd'x' 

Howev.i d.l, srre6 vary lrcm @utrv io counlrv Fd contns lke Columbi! d Mexicq 

havins cxrcnsive ovedge. hrv. I l|) dlto $urce @h, rhe@3 olniies such as Mva'6s' 

Norlh Koo d Cubq h.w @pd.livelv fa w@ i € 19, 2l tnd 22 Esp'clivclv D€lail 

*dita old.$ d.ra su@ @ giw' in Taile 12 Thir indq ism'd€!po'l4l witbles 

ioc ludi ng indices, mvsing w ide mnge ol insrilutiona l mc'sufts som€ ve 0bl€s htv' dtt! for 

lrl ounirid tud for o$cr l.s Mininun @vcdgc of dv ve'able is 12 @nttic' This 

nrl6 . rot l of 14,696 &h poids in d€ in&x D6criF{iv' $risi6 of tl@ v'ri!bl6 * 

psvided in Table ll Ddlil dsription otlh.s \€ntblB llong wtlh d8b src6 d' 

Fovidcd in App€ndix A !trd B siM lhe iid.x poides a m.Nure to judge thc level or 

dnr.i.s' idituti@l .ld€lopm.nq * 6*. dEir Elrc d .wEgc of | 0 b 12 

post. M6t ol or !a.i0bl.s ar. .vedg.s from lhc v6 

'qB 

of 'unr 

1995 ro 2003. vtry few v'iail* hove 

only singl. oh&flltios bul rh.s b.long lo @nl p0s! nol srlit $m 2000 Dcloil of 

o@g. on 4h verbh ir rhoM in .pfddix A Kofnm cr tl (2008) idi€16 dlr thca 

indiccs changc very litrlc ov.r rinc and dqpior qsi.teablv hirh coftlation b.l{cn cumnt 

.nd lacsert valu6. Eva if som. vdi.ble si$ifiomllv ch48. over lime irs 

'flcct 

i'dcx wdld mt b. nuch .nd suld nor p{od@ my signifionl .fcr in $c Nlvsis 

in !$ECtrc

f'b!. * F@ E,nt'{ntoi 6d srttdott b@d d Pttr.lc.lc^tent 

,r.rt & a,6tdd, trat 

€n'*n69m5oisq,ddiF 

:J g:'l*. 

4ll!!? 

1Z?!:! e1g4 !?,!4S1 !!l!!1 a!e99 elqe

IrtiL 15: Erhcr.d Fxtor b.dln!5 .nd *ltl*. .os sdodl

tu t*ro. ldqs d'.4tltE ltud,

7,2.3 Aggre€atlotr Mslhodolog/ 

Sinilar lrgtEga d n.dodolorv is applioj in @nsr.ucring $is ind'r 6 *d atptiql b'lN 

in annu.l 

'ndd. 

!owcv.r, in oontucrion oflhb index fd voritbLs had ulue 6d v'n's 

wid.ly in the odgin.l $r, c s nunb* of d"vs rcquist lor onhcr "f@tunl *hich nav 

80 up ro lTOo d$5. For il.e vsiabLs lhc ddimun Mge (v*) h sel 01 125 s1 &^l 

d.vi4ios alow iv€6g. .nd outri6 *ath vd@ dddc of th€ V^ @ivct Fli'gs 

equivild lo hieh.n vrls of th. oulrv whieh is jnside $e mgt Th* rsiables tft $'n 

nodlriz.i th@by onvcning sch veiibL lo d ind.x *irh a arc t

& t5t tb ti?&. olttlc/dtnmo,.t l,,'/rdM't.'t l@.d.''',Jt,/ 

taebt .x

qr:g

f.bt' 1r: kd.' ot tn'.tturtoian dI s.d.ttu.nnotou lct6 t dtonttl ttd ht 

tuh t'rlka t@u4 'dr.d b, ttsf Mr 

t; 

5J 

!ts I 5 n:- iF 

f; i E 

!a 

4 

;;

,.3. Rctultt dnd ComPartsons 

-llis solion ftpons index of insliniddalized eoial l6h,olosi6 (ctN_stiodl) ed ilr 3!b 

indies. A lo1!l oflen dojd indi€s m pdvid.d !s En'ded in Tobl€ 16 ed 1 $lc I ? olher 

sb 'ndi6 o. b. found in .'n ol cn rrer .pp.ndix 'IrE sodv ha d$ udcn'*6 q€rcF 

or comparins the index 6f inslilutio@lizd sial tdhtologv (cN_sciomD wilh olher 

indi6. Mdy indies 0E aYAihblc in liledluE @vcnng vlriols is4 ol d'volotndt To 

|!$dlEl! knowLdga m etlblkh.d in&t disls Ndng nm d ls l|r! 5@ vdanl6 

rhat ore covsql it lh. lgrcher'3 index llowcvcr' lor the purpGt ofcoDp"isn' the studv 

hs el@icd evcn indi6lhal @ be $id !o b. Fnitllv 

frl.i.d lo Fsrchcls inda Tlte 

!€ I) stalB Ind.x 2006, B.rltsm Tmsfomlion Indq GTD, B'nclstnn Fomdtlio'l 

Beni., cemary, !try,!sirtsrEuD:s!i![!.&, 2) Av.r.g€ Countrv Rtnking (1996-2006)' 

Eenmic FFcdtn of lne won4 Emnic Fedm Netqorl, Ftlg L'nilulg 3) AveES' 

oveBu counrry S@€ (l9r-2009), In&x of Dondi. FEdm, Th€ lEritig' Fomdltio 

and Dow Joica & comllny, lnc, 4) tnstnutions Ssi.. Globll Conp'titivc Repon 2007_03' 

wdld f,@odic Fl)l@ t) Avmgc Counl., Sff (2{M43), Clotal incgitv indea Globll 

Inlegnry R.pon .s*.Slobalintecriry.dg> 6) cd.t v risk m*ingq eudnomv 

ud 7) D€mocdcy Rok, wond audl ' World Coiem' Erylrid 

For comprrien, rh€ EsRhd hG tried our Sp4o.t'3 R{k CoGhtioi' fdosing on 

ordiMt infomrtid 6 wll 6 P@n oftlotion f@usitg on dE inhlal b.iw*i 

oheMridi ar ldlts (shoM in Tant 18) indicire Mh.f s inli6 h.v.. hiel' dcsr 

ol cdeladon with all .h. evd indi€s on borh grcunds - h.ving th. high61 avedlc 

clreldid @fiici.nl mong oll. All lrehtim ccficjdG @ rl$ hieltly signiliMr. Ir'.s

El.rio.s[ipa @ .le b. s iqn stur Dlol (.hom in liglE 8) clarlv slwina @61'ni 

-cnl*.9itd1bd6hlr8.t 

'fu.''fu.ho6dpa 

f.tt ra: cfiL d nkh.*tz tndtet, c6 t atnd*tkt

f,ta t at'tt to'fih..t 'tu 

. B.d.lu. Tn06r.tit l.dd 

! 

I 

t 

b. Eddk ltr.dot or o. wor|d on4r) 

t 

T 

I 

.?' 

.,,t'*t 

rd.lrffidll.a-d.lbdrcrt1d6.&{ l 

.. .: .a 

lidd olridtltloiJt d cd dm|.at {6..cld.ll

., hdd oa F.oronl. ar..doD (E ni.g.) 

,s 

d. Glohd CorFddrc r.&r 

26 

e 

:;. 

E 

..:.iff!::' 

ridB drnrtundi,. dr bd'ior4vlod.tut 

,.'.i..'tl" 

. ,;..j1.;,t"1'*it 

|e.arde.r-a r.dr bd..rBr lc8 -dr.dl

I 

E 

515 

E 

-.i,i':i'l''" 

. . l - iDlT"r ;r+,r 

r_ !r!1. - 

'rl 

'-. i.t'F4- 

ry kM 3.dlci.rt 

-.'il'F"*+ 

rdrorrsilddrk d!&tdmhryldl6irl 

r 

-.

Tt 

ft4 

t" 

t" 

lr 

t 

of 'tli. I 

}t{'r*, 

ol o! o,a 

r..-..re.h.r r..r r.an r.t(Gt d.'r{

Chapt2r Taprynth At Detoilen l?Jllttltr ol'r',,e I'/l.x ol ln$iaftonolited 

SocialTcchndqlet (.mJsr'gf,'ttonal) o l irs sab indtes 

! 

Idbhrutun sv,,n t Mtt ttt stb hlxstd"" hv t fithttl9l dd* 

I 

IE 

!t ,a 

I4 

E !TC 

if 

i!E t, aa I!fs !E 

i 

ttt

f.hr 70: aalet n'ttob ttdk ' 

Index of Regulatory and Bureaucratic Efficiency (RiB0

Index ot Ease ofdoint business (Riei)

Index of CorruPtion {Riccori)

Index of Bribery (RicBrii)

lndex of Anti corru ption Enforcement (RicEnfi)

Aggregate Index of Corruption (Rici)

Index of Competition and Market

lndex of Licenses, Permits and Restriction (RlLi)

lndex of Shadow economY (Rlsi)

lndex of Political Accountability (RpAi)

tndex of Political Participation and competitiveness {RPPi)

tndex of citizen Ri8hts (RPR|)

lndex of Voice (RPvi)

lndex of contrad Enforcement (SicCi)

Index of property rights (SicP-pri)

lndex of Investors rights (sicP-ini)

index of Investment and Financial rights Protection (SicPil

Professionalism (SiljPi)

lndex otludicial Independence (Siljjdi)

lndex of Efficiency ofJudiciary (sillfi)

lndex of legal System Impartiality and AffordabilitY (SiUii)

Part 4: lnstitutions and Sustainable €conomic Growth: 

A Global aDalysis 

Thir prn .ims to cnpiiiollv t*l wierhcr insitutions plav a p'volal rol€ in dhieving 

e,rlaobl. 6I@ic spMh- Tht.h!Pr.r p@nB t dot'l gtpind @lvsB whirc 

cl.ord 6 b q.tunrclt d.vo&d lo qplc iidir!ftos gdrn dpitis in dttcloping 

noric. the drims hse dEn M $| of probbns dxl dv@i6 TlErfoG' lo 

dDiridllv .s$ $c Dh ol innn'nios in &wloping Mries' thk in't* 'or onlv 

lc{uica ! *idc t4phbililv whi.h niinslM 8ro\rh thdies night not sjov de lo 

l.ct ofoonv.tgoe, but ole h.lps fomuht polki" !o ehicv' sGlninabL !rc*th 

smildrokhlrdd.lop.d suntn6 hrve ehreved

Chapter 8: 

Evidence 

Do Institutlons Eflect Growth? A Clobal 

h:}:SL"",.,".""' *dh M'6,h6u,n'n''n*ot oNNs^ h'hk'tuP"' tue' ot 

:::^:::;;;;;,, ftd,N,os,6 tpanat 2ooz u 

::ffi:k #; *,ffin lYx ;:;n: m : ; xr,:!: ;'#!i irfi 

:::i;-'xn:;*ti-*::':";::i:x'::-#,":^[r"Y:#:;H 

:ffi #'-ii: n' A:#^r:i': rn ; *' : ;:*';'.x:Hrn H;x" 

ffi #rtx ;#;M*'m' mnx*:w;t: 

This srudy k .n !(cmnt 10 Bl empnicsltv lhe ole of insliluri'n on Mndic develoDme't 

s-rs w lnd mbst ndno{,ologl' D@m'tric l@hniqs b'ed on CG'stion 6 vcll 3s 

P@l editutid *d €mplo'.d fq '$iturio lngiNdd facd is ctptuEi in cmpiri@l 

nod€t by index of inslirurionaliud s$ill ehmlogid tsel) 

2002_06 For CclvcrioE 

Ol,S is dtplicd, *nh sveoge valucs ol 2002'06 shoving one obsoddrion pq oounq This 

ldhnique .lthouBh b plasusl bv aboGn'ntion'd @noneinc pmblms' bul it diEcllv 

Ela,ta to wtfrpodry gF*rh lir.BtuE H'nc rhis @uld s6 * ! @sis&dr chdl( on 

$en firdin85, fior P€nel cslindio, using pooled cos{@rv dd incsties d'14 oE 

ltsdhd fi6t cmploved OLS lo a@Dl nr @wlrv spdific 'ltsts' and th G'neEltd'l 

Mdhod of Mon.nrs lcMM) 'lvdmic pan'l estimaloN b obhin noft p€re stmdes 

Sp€oifically, CMM dymmr Finel 6tioltod ft dsigned lo ecolnl lor edo8EnNs and 

onin d vldabtcs .s wcll s ounltv speific 'fr@!s ld mov€ th' 'ffel of ddogdos 

djoblcs, l.g of d.pdtrhnr wiable s *ell ir indcFnd{! vor;hlrq ft lscd ts ittu'Mc 

lor GMM D!n.l csriddids Pffil GMM .sirulion oerhodolo€t is bsed on Fiar difierenF

as w€ll as sydod cni6oro. fisewo* CMM b!$d dvnonic P'ncl Svsled enmatun 

otpo*h EE tlt imDoves the qurlnv oi insldments Re$lb ba*d on bolh Dure coss 

stiod' 6 *cll rs p.rcl .einaEs, 6ins bo$ OLS 8i OMM dv mic p'rcl neoodolosies' 

prtrdE v€ry @Nishl fitdingJ: lnlitutidot qulirv is pcirivelv .ssitcd wnh dsmk 

eb*lh Thc E,u[s oe sls p€sed rhmush sF ifiElion Lsls md sm to bc rchur b lh* 

lesrs. Thh has blctcd e3.ehd's pEvio6 fiidinss lnd turlhmorc lh'* rcsuhs aE rEe of 

birss ctusd bv .ndoscnous veiabld 6 wcll ts in'ppDprblcre$ or instruncn$' 

Th. Er ol th. ch.prd is oledizcd d follo* scclio 2) rkdbcs dtlr l) ResFs'on 

spdificatio.. 4) Cd slioMl mlFit 5) Pecl Ant\sis !d 6) CMM besdl dvndic ptFl 

csiiDarion dd 7) .xplains Fsults e) civB c@lusions dd rrhmdorNE' 

8.2. Datu Desctiqtton 

TtE &pqdcft vsi!!l. is the GDP gsrh in @l l.d Ttr* ft two sts ol inltFndenr 

v0riabl.s. Fid h the insritutiml voi'blcs ind @nd is orhd 'ontol variabl€s fic 

rcearcherbl@ index olin$ir ionlli4d s@irltdhnolo4/ {pdel) 2002-06' as *ell ts its sub 

intiEs of Rist cdeing tehnologies .nd Anli_ttt skjtg iehtuloai's for m'r$Emenl of 

Mqid dlol tdlbl.s uh s Oos dm'sri' svings s % of GDP lnflotion 'td Torll 

TFde as % of Ot P aE tate. liDm World Dlvclopmfli lndi@lo6'WDt (2008) Dip€denr 

vdiatle Rdl CDP pet clpib is bli.n frn tLslon md Sndnqs (2009)' whil€ edMlion 

{bontoMt oi Hlmu D.wlopn.nt i.d'x pdv fs hlllM dDi|,rl is llkd lilm Hu@ 

developmdl lndcx_UNDP (wiou v4u), Tcbt' 2l giG d'biLd infomtrion abonl thc 

vdirblB and $.n dd! $ue

t& 21: E rldla vdt.,}" M. tddt dtd 

'E dttttul 

R€"I--GDP p?GPrd ,06 PP dt*ded 

'i4 - 

.onnrnr P G lchah se'i6l h uto illdpo' es u 

,'i,! cop ,""' 

" "..' "^ * 

"' '' '* *" 

i265PP?dd.d6i.gcdn.nr 

UsD (isdPul (6.d rd iritd GoP i d 

Grcwrhnt ol RealcDP per..plb, PPP divefr'd 

6rcsd6m..ikevh$(9tof cDP) 6rc$domef' 

sv6 n. akllated s GDP 16. i.Dl @nimpton 

€re.ndlture lrY 6Ds.ron-z!l 

hfrn- --frnion, @s@' p&' c.""J ttl h 

''n@dE 

nav b. t r.d d .6ansed at 3pe.lfi.d l't'Mk' 'u'h as 

vea.lv. Th. laspeYres lomola ls seneHrlv us'd 

(rP.cP1I9!!l9r 

Inde lr rh. sum ot dp.6 rnd inpdB ol 3ood6 and 

*ni6 tu&r.d s a sh:r. o{ g16 d@stt p'dud 

- 

rnd.r or R&r rcdud.c rednolod6 

hd.' of anii-Ren( eehns T6hdosr€t

&3. Regressio,sryIfrco.Ion 

specifiottion ol $is nodv is blsd on conbining go*dr lhedias snch I solow {19t6)' 

Ron€r(1986)andLuds(l98s)*irhNonh(198|) Sp@ili@ltv Mod€6 src*1h lh@ries and 

rhei' mpkic. pm J( rhr .ri'l'nc ul (ont(4encc $heE lonre'8en c i) 

'onJniontl 

conditioml on rocto6 so. of whioh 6ft dlttd !o iNrilurions The olc ol lhts insritulions 

in do@mic gro*lh is eflain'd bv Nonh in tonr&t rlForv" lnd a "psdllory thorv" orthe 

sbt- To a$ss lhe ole! lh. E*tnh€r hls u@d lollo*ins sr'nd4d gov$ EsFs'o' 

rmewolk rhich nstlv aollo* ero$ah dpinca It'EluE' swh s (Bdo l99t; Mdkit 'l 

!1. ,992;0d l4ins.nd R.mlt l99l) 

/\= ro+ ftt,+ f/' + et 

wh@ t is d. @ rv .nd a is lh. €mr tm- nE c@nmic 8to*'rh /t' is .|€sEd bv 

chuge 6 th€ cDP i. dl tcds , $nds fd innnldod vtn Lr slE@x' is the €ror 

of dhl wiobl6 lG orh.r d.emidnb or so{h' 

olh.r deremiM|. olsroslh d.mLd bv f, itclu& vtrisbks b drtrt lr o$s fadm $tr 

infiE@ sm*rh- In mpidal li&jntutq lhcE h m dbblhrEl plit'd of i@lsion or@nbl 

wiabl.. Md slerxidt e t6.d o ad h* t!F@h studis lik' r'vi@ ltd Rdell (1992) 

dhplay lbour 50 @nhl vdabl.s rhd @uld b' imludcn in Egtlsio rodels tn thi' gudy' 

vlrilblcs Pn ininB ro innill ddilionq mtc@nomic slibilily, human spitll s ngs od 

Ote.n€$,8 u*d 's conlml vadables 

The 6st ontol veiabl. &serib€c inili'l @ndi'ioni llsting lhe modtl fd co'v'rg€ne a 

de$rib.d io ncNh$ioal sblih mon.ls (Solov 19t6) qould esult ir munE! grc$rn iale 

exhibit neeiilite rcl!1ionship *ith ils innial incomcs lnk shows pmr dnttics lend to 3Io{ 

fo$ss rhan rh. iioh on s bur n h condiliontl up" insriluliontl $ctox Here rhe ffiEhs 

rcsts lhe elidens ofconve4.nc. oonditional upon olhct laclos lite insliturions

l{u6on opiLql lle sens ro sld$ins consid'nblc innucrc on grc*lh !1 flsr'ns fie 

pc6s oi innovarion df new go.ds and l4hnologici uhidoielv diving goMh and 

Drcductivitt, heDce it could be positivelv Ehrcd b !rcwth Thh mnclusion is tlso suppon'd 

by l]!m (19!1,0 22) ln gn h emlirica' 'dsdion a tinneDt is wid'lv Nei !s a poxv ol 

humr. ootiul and is m6urgl 'itfid bv litchcv ote dr Primrv sch@l cnFlm'nl rn otrr 

study, * t*. rh.n @bined 'fr{r bv includ'ng €drErion eb indq ot lluma 

D.wlopmc in&r(tlDl)- 

Me(xdonic $bihrt tacb tn SDqh mpinci i' nmlllv crptut€d bv @nsumd nne 

innrtion. tl is found thd hishd prie insbbililv wolld hdr€r @nonic 

grcMh ( Komtndr 

md Mcsuire 1935; dd Gris tnd tull@k l9s9), hcnce @uld have a 'egdive exlc'M !sn' 

Seving is rcpresc.l€d bv gcs dorestic sving 6s % of GDP With Dosiriv€ 'rp"Ld siSn 

savinS inpacl snslh thrcugh incssing investnenB h'ne would dcDicl ! p'smvc 

El.rionship (Modigliui 1970, 1990; Mtddien 1992: tnd Crml! tnd w'il 1994) Adle 

inponsi vtitSL irclded in dE cufrnt Eseh mo{bl is ftd' lib'Eliarion 16& 

lib.nlizllior dd opsD* leods ro Fnorc P'i€ dinonios bv LlE ring iNcstn'nr it t@ 

of coop.tirivc tdvaneses, inclE*s lehnololv ldoDtid dd inpov€s pnduoliv' tnd 

allNotivc efiici.noy $e€bv nolinr 1he €oonomv io ils poduclion nontieN This pmdu@ ! 

positiv. imp&t on gtuwlh dd &vclopment (lin, 2o0oi sutd ed Rmkrislm!' 2002) rn 

pdiculd, L.vim snd Rdeft (1992) erptoEd th'l lanc op'n6 irpacr on 3io*'ti tl'6ugh 

rh. chlNl of intlffmts 6ln. !€sro r@hmlog i3 4i"

A.4. lnsaltualons and Growth: Crots'szctlonol Analvsis 

Cdt4mpoory g..*$ empiri6 wh s (B@ lgli lnd rsinB dd R'clt l94l) seE 

tarEely b€5.d on c6 s4riod snldi6 CN e'liod sn'di6 misl't b' @fi$t'd rirh 

lbove n€nljonej eononelnc toblms Alliough nore bh!* and dvai@ cetnalon 

&chniques drc rvlilable howevq oB sdtioMl dtrlvsis is srill used in lhis slud] lbr the 

puiros oicompdi$n dd oonsislencv chcc* otr co cmposv findinEs Panel €stiMtion is 

mploted in ..xt $lir ro @nlionr s' of lh' ptohl@ in c|rFstion0l 6trmto' 

Vstblcs in $it dltsis @ bkq s av'd86 ot 2002-1}6 pqidts dd lclt'i in rhe folldinA 

lrt = lr' + flt+ Plt + €t 

HeE the dePidcnt vai.ble .lt shox thc gowrh r|te of rsl CDP P'r dpil4 rcpEs s 

't 

insriturions v.ialtl6 *hich mv eilh.r b' ih' A@ge in&t of innhutiotlizd sial 

i4hmlosi.! (paFD 2m246 d irt two sub indi6 @'lv Risl RtdEi's l ehmlogid dd 

Anri-Rcnl s*ldng T&hnologies TlFFs indi@s tE nor used rosFifier in 3inglc EgEsion d!' 

ro lh€ f'd ll$t rhcy mighl Epresnb hultioollin@itv' lhich ould be cvid'nt fom rer' high 

coftlation b€l**n lhm (Table 23) ,{ ftpd*nts olhor coorsl lditbld nmdUv Dsed 'n 

gro*rn Esisions -nts f!cl6 imlud. iniritl coditiod' svina: iutun qPitll' inflalion 

ed oF nG .xntain€d @li€. Tabte 22 summeizd degipti* fliiiG of the vlriabLs 

wlile TlbE 2] prc$nls .|rldion mtix

tul'l 22: D.stoth'. sb.E 16' M'4. ont 200245 

n-k-d"' 

'. *'-ds,a."' 

r@l 

d. Fd"d r6':45 

lst 

8.foE looking !l esribition €sut6, ! cu@ry look !1 Table 23 povides lh€ conchrion 

.@fici.nt dlnx lot lhe k v Ydrbles CDP Srwlh od olhd expldltory vniabl's sm lo 

cxhibat . significdt md Fxitis ofrlllion wilh $vinBa Dd mgative *ith inflltio lnd 

i.nill q

Fom Ertsid p.6p&livE lhir .Lo s!i!!& lntl' includ'd b th. s. EeFlld Dldt 

cF'1. Prbl4 

of nu[i@li@itY- 

r.* s: cdt tutt d|d.at liia ce@ 

ffinco'Pc- !4U!9__!!g 

.253f) 32r{"1 

;6fi ;i^!;6|lh;i*,he oio rd 0rrrdr' 

r drM r.'$mdd rrh.0 05 rer PriEr' 

;;;Grn'c--*d'^s't"rirr'Fdr"'m'4 

TtF..lindir h ohL 2'l @hc ck'tlv tdi!d'3 ' |!brc tciliF irD"l of idddioDl 

vtLu6 d gwltr hitil GDP lF6 dD"!d i"'liE !i9| dd is tkft dgniftr ' ltb 

cb.ny hdic{d dF isn ofd!.!FE t Fqoc'd in rFrrh tidi6N'e.|iE 3i9 Cwr 

rtE cMdo *ili lN inili.l cDP hs aFi'nc'd hisl$ s$rdr d ud D@tbilnv ol 

cdhing up. ANrg olhs vdtbLr infldld ndN dDct'd Fg'dve sisn bd lnsiStlfisl 

ln .ll nod.li csft.iml of evlng3 dlo sn'iN polidvc !d hishlv 3ierjiliont |l l% 

ttdghoui, ok tlv slb*i!8 l[.t eltng it hltdcttLl !o g@lji d it inc|lc c.Pul 

d6ut ri6.rd inveFd 

Th. Irdrddl EiIi6' @6.r t.|! d. fcd dd paidrc q4t' ftr rill rdsbrt 

n'd4 Th& ildicG md! itrrhnnd qulltv Fddvdt' -d !ii6€t{v iiSEs 

so*rh. I! . t'murnio., $is rdds h.3 lEluibd '[ dE i'|dis in @ 'q!di6 lt I 

*l!E$d th.r vtrn u$d w n odk lnir0'{drl vttilbL'' |ndr sisnifi€D@ doq'"d 

@jddbty Fo6tblv beoE of hiSh mulllcoui@iv mons $'* v6i'bks D!' io dft

6c! tlF t!$IE E d dm s.!.nr.lv h rn@ a|ustiG OEll tl6 fi'ning Pnrc 

r!tult tlrridd p b.rcn itrEin|rim '!n aD*l||. HugF @fficia indi6tct' lq lot!*t' 

fid Mr8nd ii!revtMt in intin|tidl qElltv @ htd b osid'dltt stwlh Fd 

.xmDt.. if ! d.v€loping ournrv lik' Patisttn htd novqt 6un its ralrc of in$itutlon'l in&x 

b d. &wlopins oud) sn9l. nsa il sould h'rc grovn m@ $s | 5 p'@og' poifl 

nd.rFyd T|tuito L4.lsr tr! dtl&tingnmd 

gowlh pdr'in fd Ptldgtn'

!!g!::ql 

*-* 

R€CD'd 

ffrh 24: ktrhltld.nd EMk G'srh:wan sonFb c6'*dto' 

- 

^rm. Rf,r coP ?qqrqg!q4! 1!!!e!99 

(1) Gl r) 

c.rl.e$l.' 

(...r,3r3l.: 

.k"|d.-b.il.d|,ddhp-,i* 

. / .! /.... sr|nrolly,bnifiGnr 

o.o:|.21 OI)Ot|6a7 

{.09t332 {, t599 

4@!l q!!9!r 

{r.3,361t11 

o6.5$S 

!l!!9?! 

q?!!!!1 

ai r{x / 5t /rterp.dr€v 

I h the rc.rc$roi, thk vtlab4€ k inrluded as lq (t I vnlabrel 

r.'*2J.rreq.n 8!4.*1,026

8,5, tnsfint lonsan lcrowth! PanelAnaws 

Wc employ paftl estirotiM l{hniq6 io inpovc ugon rhe 6ults in oo$ sctiontl 

.nrltris. tt adds fttrher dimensid b tntlrb is il i@rp'ra!6 cMFv sFcilic errdls' 

opluni! dynmiG uique to @h @unlrv This *ill 6FuE Nddniml id'bilitv I slt'd! 

&vialio of cDP 8wl|| imBsd ftom 76% i' cN srids! $riris b 12ry' in Frcl 

srdiciB This .ddilioul witDnirv wold iol b€ optutd in cN stioMl odvti'' 

Modrcri evcry @urv mi$r h!v' ! bn diff@r gorh dvnuiB s slm f'lod lhrl 

inn*n* o counLy. mishl b. ireldam lo dhc6 Th* @dntrv spccifio rtclod 'E ml 

o.pludd i. cs*slioml eslinalcs md sould bc inoluded in €sidul vhcFrs *e sn 

control lhh .fiecl in patel salvsis bv irlrcdocing dunmie( Table 25 shows delcriptive 

spstie for pancl dd4 fi.ss rabl. 26 distlavs @rclarion Mlrix whilc @paring ttbL 2t 

with bhL 2r, cdd.rd d€virtid of vri.bhs im'ws shsplv' rnich slb*t rhll ldd iml 

@lntty +cifi. hdaG d ml clttud h rndiriNl c@ sri@l nod'h HNv4' 

dd is rot suh ch4lsf in i.slituriNl wilbl6 srdi$K CdEltrim d|frcidL in |rbl' 

26 Emdn quile simile b p€vious mrlFis h'vin8 sinil" sign ad sisnifFe SimiLtlv' 

coftlrtion mong inslilutio@l diNbl6 d$ MdN higb ud signiffdl' 

1b a@u lor @DnFv sleilic .fect3 lnd ftx.d 

"f*l 

duDnv wntbb' d'e resrrch4 E$o 

lhc pdel dlysis bv sinple ol-s ptn.l EgE$ion *nh ciN 6utrv tix'd c'Tcct 

lpoilio d h...d o. equtlid 2

hb 25:.tt d6 4fl krnr tsdtie ,!nt 2&26 

Our pld mirs ordob for 34 

d6iSn.&t m ot dr* nFr@ 

yt-ytut= l0 + ft"t + ilt iyY"+ a,+ et 

F.iod 2002-2006 Thus, dE sb$.ipr'1" 

Epcets @nrY Speiliorid ftr Parcl 

(Ec2) 

wh* l is ihe t&altL of sl p.r caPiu CDP, / Emsim innnution'l vrn|bles whilc X 

rcpr€senls lh€ el of olho €xPl.dlorv wrhbhs, 4 rcpd*nls counlrv sp€cific dtmDv e 

repft$its the qor lem. Fnal $Ec col'nnn! of$ble 27 show panel ol-s Esulrs Thc main 

nom $e cross_srion otinanon! .8 ooilim.d HiSI Insliluriontl scorcs do increEe 

'4lls 

sonh. M@v.t, oveoll 3i8nifiome of oths iidcp.ndcnt vlriables als codid@blv 

impo6 an pan l dodel. Confiimin3 rhis iudv €tults' tli€ snnarv indd !s well d rcni 

sking index Edain signiU6! &d Risk EdFing indq €roi.s icte li6nt All orhd

wiabl6 shov dtetcd signs oFnn6, ud innttio Etuits iN8Difiot *hilc edu@tion 

@ffci.nr bdms siSnill4t in D.n.l modcl 

A.5. GNIM'Inseil Dvnamlc Panel Estl',atlon 

In sxo{th models, lh€d misn1 b' v6ilhlcs ft'r aE 'ndogenous 

delcmincd ftom flclo6 

vnhin ndlel, For insl4@, if hislier invcalmdnt lcads lo gF*lh hi8her gmwlh niehl ciuse 

i.v€shmls. simildlv, hkher sr6*1h niShl b€ th' dsn for inpord'nl in institrtional 

quatry doe to Hrlo clr6t wh.G p€plc lom hiSh g6*rh c@tn6 mienl 6te Pr 

inriturions high For lh.e oss' inndn'nts @ ued to codtol &b poleitial probld of 

cndotflieg ln GMM .nnndid! hg8'd d'!'d€nt toilbls ft u*d 6 in3llundB b 

@hl fqddog*irv of rll Eg/ts6 lldds ldtricrllv spdtin& thG ntinod 6 onlv 

cotfrl fd wdl foitr of .ntrScni.tv siF n sd6 lhd lne varbbk e r€xrv 

cxogErous. wa*!v .toSsroc v!ri.bl6 d thoe l|i'l @ hc inDel.d vitl deF lal 

wiatl$ bul @ not (jmld.d wid tfi..d |.m Hdcs vdiditv of $k Mpiton d

yi 

Mt EMdk6,sr1|' weu st6tL' t nznt"dd 

G6*qdb or i.rr 6t or|b oqtlBl+lgo-L 

;A--r,t;rc eGMM' 

(r.13313!l'. 

t493L 

t1ez5g)! 

6- -Tiat-- 

l-srorr 

(-2.9sf" 

{3.t3f" 

]L 

(2 334ll": p.65r" orl)' 

3,Dn td Itvru.l' 

tobr p.rcl (!'$da.6d) ob..d.dont: 

ccffbn nr.d ldumflv v. .bl6) 

qq4c 

. /-/-.,iedr!nFriodtrc/t{/rt.rpdrry' 

,*-i-"rcuu i..tru.t* 

' so. t'ru' t3r tsa - *at-' 

th s€ rssbq st vnhbr. r. h. ud.d:, b! lvrdrd.) 

}fi.nu||hvdh6tB6ar$.h*unfr 

'n.u nl*t'.t I' n",t'..-.. 

-.a.*.ut-rt

For $k @tsis, CMM tEed Arcllsnc0ond and ArclldeBoes/Dtond'll_Bdd 

tvT' lin@ 

drromic panel cstituiion is applicd (Holrz-Eltin' N6*'v' 'nd Ros' 190; AEIland sd 

Bond l9l; ed AreUdo sd Bovcr 1995) ln rhis rMlvsb ! nep Arclldo_Bond cslimlor 

Nnh robust srandard enor is uscd. Allhough 2{Lp estim or h moE elhciett' bur ilndard 

emr nisl bc downtddlv bi.sed lot smdll smplo Arelltno dd Bond (1991)' N in lhis 

ce. Eslimdion Dode, of equ.lion 2 is 

'lso tbllowtd nere' AEllmo_Bdd €stinalion takes 

the Fid difeMF rom or.quolion 2 This l!t's $' lollowins li61 diff€Ence tbd 

Jr- y*t= ItO ' r*,) + 11( I', ' tr ) ' 1t(XfX'l+(''rer| 

Gca) 

This lr tsfoDdion is dooe ro dhl nt poEnlitl bhes elscn ht omitaj wiabl6 s well 

s @utsy speifi. efr@t- lo @hl lor cndogcn'irv thh ndhod us lacgei ul6 of 

depqdenl s Nll d indcpcnd€n! vsisblc in kv'l lod N ins@ntt in equrion of fiut 

difr.€F fm Here, imlsion oll.gs.d dcp'n& 't l'wl ir dE to lfi' fad rhd @r iem 

in rrsl dift en@ cqulion (cq l) (€t - €h, Erdt b tt @Nl'icd *nh lvfrj _ vn' 

Howeve, BlunLll dd Botd ( 198); t.d Al|osaofrsp ud AFlldo (1999) lthpmrd 

rhal iosinme.ls usd in list dilfcEn@ c4uit tion mighl b' vok espoiallv sh'n EsEssN 

lars.ly Enain cmsisEnl rhoushout rime s ir is @mon in shd timt si€s To overcme 

lhis walnes, dolher srimalion ndhodololv btlal AEllano_llover8bdellBond tt?€ h 

adopt d introducd by { AEllmo and Bovct 1995r ond Blu l€ll dd Bdd 1998) Based on 

GMM dyndid panel sr$em .slimarion, Ii6l diffcftre equation (eq 3) h combined wilh 

equalion in level lom (lq 2) in . svslun -l hcft drc spdrar' *b ol insnxm'nls rdr wh 

equotion in dE syslen Fof fisl difcEnocd .quadon, lho truPsed 

i'shmentr dc the l$sed 

valucs o, dcFnde d well !s ind.p.n&nr uiable in lev'l fod rhe,6 Drcposed

irsuDdr ir .qu.rid in Ltd tE Lgred ['s dift|!|E vtl!.s ofd4'lLdt tid ind.?ada{ 

Homd, qtdibililv of @lt in bol|t ddE& @ld dct@d d lht rdnftv of w{uv 

.eso@s insudErol w ld smPllo s dpl'in'd dlid' This 'sswp(m @ E 

slari$ic.tly le3.d ci.g l) &4m itlt of oFidcnlifling Fsrdior wnich Lss ihe ovdll 

validity ofde idnuncnls md 2) S.6d odq srial coi'lrtioo t.sr witn hlDorndis lhat oe 

e@tqi is noi silllv @ftl.Ld. (AFlhno dd Bdd l99l; AEll@ tnd Bovn 1995; ed

.r* 2a: l|lnfintG.rd a,F',,tcdth: r$uu ttlrE ac't..'l,g|,n'n 

hrnddt vrt bL: R-r Go? P.t C.Cn nOOpPc 

t7l PL 

_ ,_!:E 

(r.71)". (!:!!l:: 

(_2.trl" 

loross2. I oo2e7e32 | {6137 

aY-bl I 4l ,-aot 

0..754 0 5tt3 02909 

s€qd{&r *d.r @..Ldd tat bhl*)' 

r/-/-.rdldr*tunrd/5*/lrcrdhrr. 

i"---i L*- aa';mu.,oa 

,';E6d*drrdfu*ldk 

i*Jeor"iioo..Loll;".'dr'{d.fr 

n;iiu-.Mh.'l''d-o* 

.*deirFddE 

'hk4sbd3c'd|Lhddda!.tr.{i$|l 

'kd,i6*- 'r*rh"'".-sd 

'iE-,h;kb hda6.ffi heidiri.ao,-dduhhioEe&,dj"ddd

8,7. I.€suLs 

Tho dydmic p.n l eslio.Ls sugg€st tiat qu'litv of institudons exGtu t l&ce' pcitive imD0ct 

on sndic so*4h bsl lno. mlum.s olTable 27 prcent lhe Esulls Nrng 

lhe /iftEd. esrimolor' H.E prcviouslv ued rcsc$ion sp€'ifi€tion is enDloled' GDP t'r 

capiL go*'lh h dgE$cd oler Institltion3t logarirhn of iniri'l GDP ro find €videne of 

@nvdgdce, inn.ljol! evitrg op.nne$ Md humd epiLl Tht 6d1 lorsolt Fmains lhe 

sm.. Hov.vq, ov€roll signifi{n@ sdilv iNMcs {hich 3ho*s ou model is 6busl 

poblds dieusn b€fN Oor summotv insliluliodl vtitbk s *U 6 iis sti cnt sljng 

dmesio trliB pocni( lnj tgnrfio *hil' ri* Edxing @mpontrl rmain\ 

iEiSrifidr l1Ek @|fridB hlt gMry impDt€d *nh fd dilT'm CMM show'ns 

dEn iipoo d mic go*lir h.ins now doch larScr' v!16 FpEs'ni4 mv'r8q* 

de shsinB qFr.d nesrtit. tlns .rl hiShlv sigtif@! okdv Ddvidc sidc@ of 

@din@l @wrgcc vii.bk EpB ins etin& oFrB sid hmu 6Prbl @tin 

pcirirc.nd hisl y siStifiul i. lins wilh dpalllid! wl'ilt inlttl'on tsi6 insiEnifcdr 

Hosd€r, fd *n |j@ Dh{c sd .mcid! 6tim'tio4 lh' t!ffhcr nnh€r dplo}td 

cMM Iv s'sh carimaror (a61. 28) ro e$ lhc !.liditv ol Eslts ln sviem 6t'mt!d' 

sswlh is pioxy by Rdl GDP D.t dpi|! E pl.tr ro'v vtriabl' 

'tuhd's 

in$kotioni logrntun 

of hs dep€ndcd tsirbl. io sprurc initial .ff€ls $vi.& tnd log fm ol op€nttss' infladon 

dd.dMrio. Th. Esulrs l!lB.|Y 

To .sss tlE v.lidity ol insiruncnls, stigsn |cai s *.ll s l'sl for sond oidd serial 

conelrtion s p.rfomed Th. Huh in lable 27 and 28 snows lhlt null hv?othesk is not 

r@pred in boih the cts6, h.nco insldh.nB ofr tppsDriltc .nd 6ult3 e crcdible'

ln shd! tho mpiiol @h spporls conv'Bcmq evings Mtimd posniv€ lnd hishrv 

significofr l% fidughod, cLflv showing thtt eting js instonqbl lo go*ln 6 r 

inc@ capirol @uldion dd inveslna|. llunsn opital ms$Ed bv edudrion! {6 

lound to b€ srdistictllv signifi@t and p6itive This indicatd investing in hund dpilal 

wduld pioduc. ! po3ilive impoor o. gruwlh, as it iicr€s {o&dJ quality ond nliMr€lv 

inci€s prcduclivitt -Itu @mcienl ol opcincs Fprcsnlcd bv tdde lo GDP hav'ng 

qpel€{t Positive sign lnd highlv llgniliMnt, sl$wsd incrcled tBde liheraliarion inpocl 

g6fih in a posilive wav The c@ilicicnl o'res4rchcfs ffdin innnulid'l vdiable' ind* of 

insrituid.liad si,l l4hnolosies (!tn l) is sir:i'isit Dd Dositive indi@lins insiiluliodl 

qulaty posititely .nd sicnifi$l inllulM !rc"ah Rcslt oft*' sh indioes shows lhal anl'_ 

r *.lirs indcx @ais posnivo sd sigtilidl li dlrs! In&x ol 'isk t€dDc'ng 

lehmlogicr s b b. insignifiont TlB Eelc *E quitc sinile 10 Aemoeu alxt 

JohMn €mt *ho de fdNd Arli Rcd Seki4 i$lihtlms DrodEing a (slL6b|€ 

impd d €@mi. Frfot!|l'M whe@3 fi. imptcl oln{ rcnsin8 innnuids o 3oM 

w not w.t sis.ifiunt Th€ llls thev sivc 

to lfiis l&l i3 iluiL mviNing' in abs6 ol 

adnrl ;sk cdcing idlirurio3 cdhcti4 indhotids _ thc Elt is fillsl bv pnvale 

alEmlive inditutiMl amngcodt Howcvcr' *h€n borh of lh'* sub indi6 aE combin€d 

inlD sudbory indo{. its ocfici.nl b considcoblv hishs lhln lho odia twq sunxeslin8 ns* 

r€ducing r4hrologi$ mish nor Foduce 6uh alone bul do prcdue lhet oM inpa'l Nhen 

oobbined rnh Anti Ent sekiog tehnolqica Thee lhEc iidies can b' onpaftd wilh one 

anotho!s the, all mnge bclween 0 lnd I 

oleEll, lhk ffilysis suggesls ihll innnulions pr.dme a posilive elfect on grort ad 

.mmic petlomoa MoE6v6, li.t csin&s @ ltrge showing lhar jusl liile 

inpovod in inslitntiorol qdlitics qould parw. hlgc imp'c' on em*lh dd @6nic 

p.rfoms@. For insM., if munlis like Alg.ntiM ud Colonbit impoved ftcn

insri0doml qulity 10 dE lev€l6f.vcngc indnuions' tfi@ft{idllv thev suld managr lt) 

i'ru their gtuwlh bv abos lqlo d'urllt ftis is huBc chmge 'onsidsinE rhd dEir 5 

,.$ rv.r.sE eD*th h abod { o'lq 4 4% rnd l 5% esp4livcl} 

8.8. Conchttlon 

't hh rsut! ba$n o' both pdnel inrt cm$ stions copnits' sngslsls t stung link L'iwed 

insrilotioml qulirv dd ecorcnic ercvnh, Ano's rhlm impd or nsk €dsina insl'ruions 

*!s nol sistifiQnt susgestinS thal io lbenc' of lbmal ftk red@i'a inslihrtions' inlbmll 

.mnssment will develop, giving poletion in pl@ of foddl itsrihnids However *hcn 

horh of $* btud of iNtitltios * mbin'd in d indd{' lhe ctraa on gmwlt ts much 

m@ pomuMd d dE @frrcial ol$mmary inLr rc msideftble Ngn€r lns tnc 6ih'r 

r$!. TIE drs dhl vtiabLs sno*.{t lh.t mrtt,.ddic dobiftrv' hulM ctpibl Ftysidl 

..pitl rnd cmnt dbt hdLF luvc lasniarel idp'd B F did'i 6' dEdv TlE Gull' 

.lp coid ondirioMl 6wrs.@ s pEdnt'd in d' nDdm $qi'x orghMh

Chapter9l lnstitutions and Growth: E!'rdence fiom 

Developing Natlons 

ffitstywffirm;*,ffi 

rf:ffiiiiix,'8;g i;#N^!.r#;'tr::;:W 

;:;',; ;;^;,; r, ,'i,., -o"n^ 

':::;;;;:^; 

';;.;, *,-, 

"b. tund u@topr{'| rd@@. cw.,ok*d tot Pn*Mt 

Wit;wri*:":n'::;:;;#-;i':'r#::Hftr:Y"H:i" 

";;;:";;;i; ;;;;;;;; *'-* "ii -,t,,^,"'.â o-"t"s'tu "tune\ 

ot @tuh w 

hunm soll lor @nomic erowlh md delclopdcnl is lorgelv lnd losilivelv itfluflc'd bv 

ea& of p€vliline iNfiulions. Tt'is 4llridship is tu8s dring the ldg tm gd*rn 6 

cmpdEd lo E shon lqn. Tnis i panicula v idpontf i' onttxr of dcrclopina @unh'3 

vhich sdfer nom sidgnlrid, povenv lnd in'quolitv Tnd' is rn obundmce of lil€diurc on 

Solow grdwlh modcl and ext nded ddoS€nous grcfrh model 'fth li 

lm$ision ndhlnism, disbibudt polici.s ed i'slitotion! e {or*i4 pdp$lv lnd 

it|clre is dvqginB io ! hieh l4l. Howder' in dcwloping @nuics this as@orion ts nol 

valid dd cdld b€ oe of lhe nd impont.t |!@ns lor lor pddrclitirv ud skewed idorc 

difiburioD. Thoir sodl of @tch up *ould kqtriE d pt@ of gowth co'sidcablv nore lhd 

$at oldevclopcd notions dd d sushinablo Smundn 'hiclt is dlv po$ible under the dbrl 

The piwnr iudy mlt6 d @ly ancmDr b .npitijllv tFl rh' 6l' ol inslitutids on 

e@nonic dev.lopmcnl in conlexl oa d.v.lopins counLien 6ppllins the index ol 

"indiruto@liz.d siol lahnolosiel' develop€d erdicr This index b made up ol Rhk

En*ins |clmlogi6 dd Anli_Rd sld!8 |ehtuloght P'tvios @lls dlid 

i.niNdodl itrltcM 6 grcslh or., wld spl' in ! tinpb m'&l tl@E in $is fidv 

! moE daibd nodd n Escd ittdlo"ling w t-lc lik"r'tu| &b{ t'd b'|re of 

ItFd which d FnicuLdv im!.d.nt for &*loping Mlid* ln fi' c!@t nudt 45 

d.rcloDins @udi6 (s llbL 12 fd mplc! lit) d tLccn lioo ditr'Enl F8iods ntc 

fi. el.did b.in! 8dgnphiollv b.lerc€d Th' dli,r sodi6 ltd dE {hl!b'*s tnd i i6 

which @wEd .idF @ d slv . 'd cD6ts of inridiodl clp"ilv io B1 sn 

ntTortE$. HN€, a.&x of 6is lrudv cNN nc lht! loo &lt sG .Min3 mst or 

dE iGdrdidl 6t4ls, Thb tlsen wd* lbo rd! ho* |lF efig@ic aitbilitv 6d 

iniadl .trd .xl.@l evinst itr41 sow$ in rL p|l*@ or i'ls uri@l t&lbkt Thc 

cll.p..r is o4$itd c fotlN: sccti@ I gi6 i ttrdNtid! sid 2 discus tl* dpiric'l 

rid. oldE p.D.r &d tdid 3 of6 c@l$io' 

9.2. EmPt lcot^naws 

cMM insloN.nt vE.blc Gn'tutid Nfiod is 6.d ro i.Erie& linl6 b.rPd n lidt 

insirodNl qulity .td d'Mic gern. This ab6.crid d@nh6 d!r!, dE Eg6ion 

lreifrclriN rd ff $odoloo/.

9.2.1 Data De$rlption 

The dcpendcd vldlble is the cDP Sb$'lh 

in ral ldn'3 Th4 @ two sts oi indep'ndo'r 

vrriables; iNliturional variablB dd coniml vtd'bles Tnc resdher rsd indi6 develop''l 

in $e ohdpler 7, nmelt rhe indcx oi anstitorionrli4d eoial cchnDlogies (cro$_sctioml) ed 

its iwo sub iidi@s ol Risk rd@ing l@hnoloBi6 $d Anli_Ent sti'g lechtulogies' for 

iEridlid0l ptoxy Thes indi@s covd l4l @u ric5 'dploving noF rhrn 100 dota srces 

dd @v.r ! *ide 68e ol indiluliotal p.rf@d@ i'dislod Thct !rc it 0 to I 6ne6 

wheEhishovdud indido befl.r insliluiidtl quliq D'Fndcnl dd@nltol voritblBsuch 

d Ral GDP GD*rl! Go$ Doncsic Ssvings s a pc@bSc of CDP' Debl s 3 p'Mug' 

orCNl dd lnnalid @ l!I4 tom Wodd frt.loDm'nt IndiciIo6' clobil Dcvclopnenr 

rid@ od wdld Bsx A Foblic inv.nnd G % otcDP i' bk'n Eom crv 'l !l- 0999)' 

All rtrs ve.bl6 d qpBecd in hs of !v.r.rss nom l|.|c vqr 

1933 b 2ml dcFnd'tg 

o ihc lvtihbi|ny of.Ln Ral CDP pcr Crpib ii 1960 k br'n fm t'vine rd R'Nn 

(19c2), *hile H@x {twlotmat t.dd in tlrcn rios !'NDP Tlble 29 riE d'iriled 

infomdion .6our rh. wi.bks dd rh.t dob e@

I.bL 2t Dota sqes dut D6clPdon 

lgSl?qq ]!@llf d€d 

!if!9@!4!L 

s.wo3 

rndic.roE. y&4!q!L 

9q!p4r9!C! !a!e9!lE!r4,1!!L-

9.2.2 legression Specmcadon 

11. mod.n so*rli lho,6 md $6n 'opirict pDvid' fie evidde ol @ndilionrl 

@rcrlcM, t6el on f!ct6 GlsLd lo inrtunioB To @s $* ot4 dE ht3 

'tgEhq 

u$d st.ndrd sFwrh Esrsid l,@*ott *nich nstlt grf,rh dpine licEllF 

'olto*s 

such s (lt!m l99 t; M{*i* d al. | 992; !nr! ltvinE ind R'dk I99l)' 

ly= fo + ftL+ f,X + €t 

wh.N i is the counlry ., is rhe eror tem ftc @omic smtr'ln /x n neNEd bv chtng' in 

rhc CDP it Bl icms, 4 siands ror ifftilutionll vlriobles, whe@s -t is lhe veclor ol ennol 

larirbls for other d.lemind6 oretotlh. 

lo mpiriel lidduie, rh.E is no csrrblishal pdrlsm of inclEid of dtol vdilble Thr 

pltgl sbdy *ill b€ 6ing vdilbl.s peilinins 10 inni.l mdnic naMom'c sllbilitv 

huhd c.tib! physiclr €piLl, evinas d.hl !d cm @r hr.le 

Th. fid dml wi.bL dsribd i.ili.l @ndirio's T'ning rhe no{'el lbr onve€d€ ts 

d.$iib.d in n4lsiql grdh mod.ls (Solo*. 1956) {ould EsI if condv grewrh 

.xhibic rcsltiv€ €lalio6hip wilh irs inhill ircones Tfiis sho* psr conlies lend to Srow 

&$cr rban rich cd.aies, thus thev lend lo @vdgc .orc$ muntries Howevq, sludids done 

by BeD tnd sal!_i_Monin (1992) show rhal Qnvcts.ne is oonditional upon other cconmio 

v! lbles. The E*Nh Bred $c elidene ofconv.tgen* ddnioml upon olhq &cion lite 

inslirurios ln lhis fterd,lhe Mh.r u*d Rsl ODP pd dpita in 1960 Tn€ 'xnetcd 

Anorher ftu lwlling in ssidchblc inn*re oi ctNh 

p.€ of inmntion lading 10 gE.tet !os4h .nd Pducnvitv. 

't' 

n hmm 6pihl h inc@3 ih' 

In gb*d mpiricst th' 

slucation atainhent is wi&ly usl s a prexy of hom.n spibl brn a b€d'r m*sE rs to 

oombine ed@rio. attlinnenr !lon8 wilh orhq vari$les like halh as h donc in thc 

zr4

cuMl sludy. txlt is mll*i.d for rhe p.riod of 1990lo 200ii wh'rcv€r il is avlilable lnd 

6.d av@sc v!lu. in lhe stutv M&r@6omic ta'l6r in gowlh !s 

'srnbilitv 

'mpnics 

Mrlly c.plur€d by consuner pri@ int!,rion h is found lh0l hiBltcr Drice insllbiliry would 

hmpd ecoNnic goMh, heM pssibly having t rcgltive ekD€cLd sigE'lo lvoid th' 

muhiollineiiy iss h€t*d th. sving {nd invdln'nl' thc tesrchtr hs ued onlv puhlic 

inv.stnenl Ettt. lhnn total invesrm.d. InannmtoE invstnenr is gird pdxy lo E rd 

lublic dpirrl sleb ll inllene Mnoffic cxofrh dd public capibl ltocks as il 

conpl€menrs priv.le invcnoent in cnhocing gbllh' 'ftis vtnlbh is dptutld bt p$lic 

inveshcnrs 6 pcdnloae of Cl)P od is ntpolhcsisd to b€ nosilive SavinS h 

'siSn 

Gpr*nlod by eoss doD6lic sving s % of GDP With pdniw tien' $ving 

'xpded 

inp€.l go*1h lhrc$h incr6in8 inv€sdenls hdce {ould show I lsilive 

!$o6ed thrt highs svings pEc€d. @nmic grcfin 

reltlionship ll is 

Andher l&br infldtuing sowlh is fie level of public det't Trdditioml growth modcls 

pEsn. {t b| s a lom ol jnv.$n.nr which adter ofr the Drcbld 

of l&k of sYin8s &d 

produe posiiive intluse d Srowti Hovov.r, rhe efe! df hign€r debt on 'ooionic gDwth 

can tt ftealivc. This is h.6u* ol the hnoihdis oa d.br orcdanB ndirg lh.l for ldE 

deb! in|can p,ymdl ould 6ls inores s outptl inct€e Esultins i. ! icl dd€se in 

inv6h.ns. ThG mty b€ cded $ ! fom ol r,r o inwstnd. slowing tfi. pe or8re*h 

The nudt hs used dch s a o/o of CDP $ indislor of public d€bl wilb rcgarivc cxped siltr 

in gollh .qu'tion. Ldly b mesuE lhc @unlrt's &F lqr. on intmaliodl Eeu's dd 

fodign $vings, lhe rcs.irchs hs used a doure of cuftnt @unt bol&@ as p.@.l'8. or 

GDP. Th. dpaLd sisn is mbiSuous s in s. cls duin8 Fdods rhcn ! Ng!|ift 

cuftnl a@unt balane exists: ft. sDody ir a.er bono*€r Md moy hovc pcitive iDptct 

d gow$. Anog noloble varhblB io! .!pIui.d in thc ersth model b li$! policy

indiortor. *hich ploled io b. skristicillv 

th. Es€sion speifi@lion 

h*:*tt e&*sr..ItB 

9.2.3 E.dD.doD ltethodoloE/ 

dref@ nor hed includc! 

Th. |!s@her hd Ned GMM pd.due in lh. mtFh TfieE ir a d€dh of lihruE using 

OMM merhodolog in line $rics, crGlsctional 6 wlt 6 !€El bt$d asimarions lt 's 

baed on rhe 6e$od or somenrs (Pe@n. 1891, 1895) and dlindrion techniqud using 

in$tumcnts (ReieMl l94l; streo 1958; llmsn 1982). cMM eslimltion h bas'd on tho 

el&tid of paldel€N 6 $list $e $orlictl Elotiofthip vnh nininm devialions tl is 

morc oblsr edinalidn s mmpdrd 10 olnd .srimdid nElhods like mdinun lik'lihood a 

it is lmlfet d ro rhe @toE of di$6.e disniburim To ,pplv tlis dlodolos/, r|i. 

foll@ing .qdio is dimr€d bY GMM: 

ttn - fo+ f,L + f8,+ et 

Tt. inndmdhl @itblcs lor rn€ equrio e lll .xpld.torv vdabl6 l. thb equarion 

sl or inslitutional v*iables od ). is et of ot\er ind.Pen&nl variable 

B 

'r '

icd;;Frtuoot k(zdrd) r--cd||ielibn,!t06Hl2{*,. 

q!!4t!p-@4@E 

--cffi b .!dd d tE o 0r i.s (z{rr.d) 

6I rEn6. h o 05 rd rr+i€d)

9,3 Es,i',atlon Results 

B.foa looki.C ar 6lim.lion aulls a cuist lo'* d dE ctftl'rid hlbir in Taltl' 31 

including sF.lmn 3 Ruk C@la1im lNBing on ordinal in'mltio s t'11 6 PeMn 

Cotrlotion fEus on the int€nal b€twan obscdalions Th' sinFlc cofthnon 'Nfioicnis 

b.r@n rhe &p.n&d vdirblc cDP crewd rcpFented bv cDm8803 6 *ll 6 Dosibl' 

expkulory nitbld 6 3loM in bbl.3t hth siSDs .@diry lo 'xp'cblions lncilulioMl 

p.rlffilne $d 6DP go*{h exhibil a Positivt c@ltlion lnnttion sign is neFl'v' ts 

exp€tc4 shoaine lnol n&reo@ic inslobililv hdnFts gb n The sisns of evjnS! and 

d.h ft lls 6 d!6cr.d sltoui's .h.t evinls h.rc a Dosiiv€ Eltrimdrip *ll€gs d't( hd ' 

ftsrtiw rclarioBhip with so*rh- ltDl sd inv6lmo6 tle dePicl'd positve si8!s 6 

.xlEcted shorin8 tnat inv.$m.nti panicul.rlv investnols in humln dpii ' will posililclv 

implcr go*dr. Nesltiv. oftlt.ion bellFn inirial cDP Nd GDP grcfih slDNs t high 

likclihdrd of @v€'rp@ thtr ls {bvelop.n cMmd o @h E r'nk of advdc'd 

colntri.s Th. positivc ai8n rilh cu@t @onl bskn@ pGsiblv lhows thar twtv gbwing 

@nonics have .xces dotoesric resuGs and suPlus tunL lnstilutions and intlarion oxhibit 

n galivc c@lalio6 6 Gxrelcd helN .ffelitefts of mstlMMic Dolici's reusing 

on ms'Mmic sbiliry md @hl of inndion wdld be innu.tEd bv fie qutftv of 

pcv.iUng institutions. Ii. ooGltriotu shor lht. cou.ri.s lirh h€ter innilution3 hdv' 

usually hictE. elinss, low€r debt lnd suDlus in cuftni a4ounl bohne lnteFslinglv 

&rclotjo cffcidts otMg iditoliml voiabls e.bflr 0.9? *hich is exM.lv hagh' 

Tnis indisld dur difl.Mt ins:tiddal n6u6lEw hiSn @mmn f4tc d *trich tlE$ 

n.su€s m deptnd.ni Fbh a €CFsion p.*peliv€ this .l$ sugg.sls rhar, if includod in 

lh. eme Eerdsion modcl, lh. prcblem of mulli@llineuiLy misht dis. coftlalion 

@trriob ol inlbtjo e pGilire *ith sving, tnd Ngdiw wilh dclx indiding lhtt higiq

aov€dms( d. Lv.ls @mpomi* momllrv |$licv objdriv's' lh'Fbv Nlrin8 in inaalion' 

(t .he olhs hdd, qvin8s F$lr i. low.r d'br lnd lorcr infldion Orhs o(ftlalid 

ccfFcients shov th.t counkies wilh cuNnr @dnt suDlus *ould htv' highs svings' tnd 

Th€ e*imation Eel$ ol..rlv indicde 0 Nbusl posiliv€ idptcr of insrn ional viriablcs on 

gr.Mh. In model I (Iable 3l) all varisbl€s hsvc sigfi ond e€ highl) signilient 

'xpeded 

speciicrlly, initialGDP shd*ing qpeckl] n.Salivc sign md highlv signitcdt This oletrlv 

indioles lhe sien oi snve.8.n€ .s pDposd in 8ruq$ lheoris Nerative sisn shows 

ountid *nh b{er inii.l GDP havc expcricnoud t higl goMh ale dd a nigh posibilitv of 

Elching up. In o simuhtioD b inv.stigaE rne chd@s of utmnditioml oDvsgdce rh€ 

Es@her leied the ndjel bv diding in$nudmal vuitblB liDm ine equadon Th€ sul of 

lhe equlrid sho* m indiolim of un@ndilioiol sv'4p@ s sisn for inidar CDP p'r 

capih Nd 'esa,liw bd i6ig)lifi@l Thh maN th i'ritdim'l F fodre is a po*ible 

panqditiM fdonve4rc Mmwr, o€mll liSnifi@ of ortFr indeDq'rlenl vditblcs 

ale imFo6 *hcn d i.$iruiidd vritblt i3 inulducal in $e nod€l Andts obd 

ydjrbles, innalio. wilh etpdcd ncsttih sign h hiShlv signinqnl al a l% l*l in lll 

modeb. Thtu suggests rhal @mnmic iNttbilitv hs ' estlilc eff€cl on ecmmic 

gb$,lh. ttdcn pu$uing Flici.s ol i.l alion ,idnc'n S6*h 

mighl not b€ fruilfol in long 

on. cctici.nt of evings als cmlins po3iliv. tnd highly signifiont al a l% level 

$ouehoul; cldly sho*ing thal svin8s is insinncnidl ro sro*lh 

as it incrcs ctpilal 

o@usllarion dd jnvenoenB wilh Positivc arpeted sisn, s.vins ihprcls gn*1h thnugh 

ircdshs inv€stncnls, hen@ rcneins i poslrivc tlrlionship Public invslmeDt dfioient 

sle shoNs a signifi@l Fxhivc sign iFplying thot inileruotuE investn€nts prcvide posilive 

ar@'iliq thdEby inr6ing p'dluclivity od so*di. Atothe. fom of inr6tnd! sfiich 

dld p'oJdr a p6iriv. signifioni log run clf-r on gdrh is iDv€ring i' hlllfu catihl

noE sp$ifiolly in.dlcotion dd h€ltth rne s dv ued tlDt chdgc 6 r poxv ti' htrno 

oapiul and aound it io b€ sttisti€tlv si$iic! lnd Fosirive 

This indiolcs thal invening 

hmu .opibl suld ptod@ ! pcitile impsl on so*'ln, o il iNEaer workcdi qulilv 8nd 

lllnna|lly inclles p'rdslitilv W n ECaai to odEr Eiab!4 $c dcbt veialle M 

rcgdiye sd highly stnifi€nt ar l% ldel 5horing $tr d imtts in d'br will l6d to hthcr 

debt sewicing .x Isl, hen€ cowding oot public inve$ned -lh' camoient of cmnl 

ldunl btldce prcv€d ro be nesEliv. and significant This mav sugg'sl th6l munlries w'th 

hi8hs ouml '@!nr {bncib enjov hiShs grc$4h Ttis nec'tiv' cmcicnl @rld be 

t@!s a dml a@u dcficn l@ns rhlt lh. Nties @ ftr h'd*u lnd tlEir d@esic 

evings @ complcm€ .d by fo€iSn evingj llis ould nsn rhar i'w$n' oloodd[les 

in rhe ountry !re moF rhan whal lh. domcslic Esou6 @ findnc'' ficrcb, incMsinS 

Elilnc on focign apill 

IE innituioMl varilblcs @ffiddts e highlv signiii@t dd p6itivc indiohna lhot 

idnui@l qrlity po6niwly and siSliard.tlv inflw|E S@rh ln ' 

'n 

iruldid lhe iu'lv 

included aU rhds indio.s in one eqution lt ws witn.sd that when u!'d individuauv' thcv 

b@ne highly significant. bul when n$d wilh o$ei inslnuiond vodables theit signifienG 

d.ceen mnsi{leEbly lt nay be lsmed d.r $h ss de b hicl' nllliollin@nv tno'g 

rhe rsisbLs. To €mw multi6lli@i.y, lhc Mh.. ued lhc vtrisbks sp'dlv in 

(hr.qurioN. li.lhe indic6 &n€d $prdtclv fc i.slituli@l qulilv e a Mpositd 

index of iBri.ltionaliz.d scial rcchnology tnd rwo of it sDb indices ft index of rkk 

rcduc,hs te.hmlogi.s dd rett wkitg lochnolosi6. All th@ ae psitive and hig)'lt 

sisnifimr d . l% levcl. Tn€ mr sling indd oEficicnl i5 30) cds. @mporal'v.rv 

leBd impdd m 8rcwlh lho tlE nsk ,ej@it8 in&x (4.12) lle inniuioMl indi6 e 

comp'nbL $ th.y all flll wilhio a sinile Etrge, i.c., b€tt*n 0 ond I This mms lrul !nt- 

r€nl*kiry indies h.v€. sronger etr@l lhan the ind.x of risk todfting rehnologi€s. The

@ll5 wE quic sinild !o od dlicr dlB' hosv'r in dis dudv' rist rds'ng 

@hFlosi6 do Eodu..d . p6itiw rd 3iFi6{m imF 'r @ spsrh H'ncc iE inF l d 

g@dr nish b. lt@ Ffldti.cd fd&wloping ditti" IE @|rs tbo hct ^strog! 

.d loltM (!005) sto @tdt d tur priEE intliu|lnl .fu8d6t dld fill |!. Flp i. 

.beE of lmd tisl EdEitrg i6lit',aG 

f.l/b n: tE 4 og'/.'/dt cddtu. h.ltN b rt,@@ 

-"ffiffiTffiHffitrffiui'ft-

Ddrx'.dv.n-&@Po.|03 

n-rq*"a 

refth t3: Eqtession n.JuLs 

t5:3rt65f': 

[2a2l5srf' 

(,2.rr1o5ll 

(f,.36261r1'j: 

tr 3169s6t.:j 

0 6793:13 0 6t3{61 

,djd.d n{q0r€d o s93st 06t}a5o6 

DuArn-W.bon *d 2.333e6 

gum squarcd rerd 33.63296 ar.6rb4r 

; . sltnined d dt. 1q6 b!€r. 

..s|anlfredatthes9t'h6|' 

..€l.n|fr€.l.to81095|.{€l' 

lmtrum.di*A||l|d.Fndvdj.bl. 

hrd.a oDrtu a3 aE iltub 

1r!6E_r0 5 elE 3o

The study u$s clFs4lionrl dd! of 45 dcvtloPing @drics 'vdg'd ovd d F iod of t'n 

F6, im 198 ro 2008, IF CMM ioclniqu. h$ b@r lppli'd Ih 6tu !u3'!r t sturg 

li.r bclffi i't.ifitiml quliiv d dBtic sp*$ 

All diE tt|ds|G of iNlilujdrl 

qDality impel @ononic gro*lh signifi@llv dd posiiiv€tv MoGoE thk e'ly3k indic'Es 

lt l mdg dE r*o fodB of ii6linnioG, dF xli'@lerii8 tFntubgi6 dlicl dllMic 

g6rd @sntnbt tt@ ds risr Edring l4lddos€s Th' olls c@tol vli&ks slN 

thar oe@orcmio sLbililv, huru @tit l, Phr{iol 

ctpliil 6d cum 

h!€ . .ig.ifio.d inF.t 6 .mio rb*tt (s FEdidGd bv tl6v) llF @lls tls 

@6m rh. hl/!o6€is of codhidEl @w4!.cc s F'dkxtd bv modqi ddi6 of go*d! 

Ovedll, th* Buts sgigcsr ft!1in$rruiionil Gfoms night pt'v s pivot'l olc in d6ignins 

od idrkmatins Mmlc policirx h th. &r.lopins cMti's

Part S: Inr'Jafti.,,rs at|d ersut|/oUcM: tuHs&,n's 

Perswdve 

ni!'Pattdlon t fto||.. at Prlh lo trt.t' itL ddt .to c6tdtt' to 

'ngL o@v 

drmL.Illt dl)td. @ld h.b 6rnub . pobt .b ftt dl4i8 di'bL rtddb

Chapter 10: Are Institutlons lmpofient for PaListan's 

Economy? An Emplrlcal investlgation 

ll"'j1:1?..""",. 

;;,;;;;"'^; ;,"-",. * ffiv e dttzrtft' r qeohe ot tuto 

-;;;';;* 

'*- 

' * "^' ' "dha*"ou'd .nzL'tt oNt'\E @n ton' aa 

'iilli'i,J 'qnot 

i, * "i"t --,,,r' e"t" tu pa*q pnaas n nau d nsL'!'Etuu"d 

';;;;:;;"k'; *, * eb n,b Nneu 'tstd ai'k t'd@ s ond Ad' Fcn 

^,, '*nmtoia 

#;"#{:.[#; ffi,i #?:: tfr i# ffi : #x ffi tr'ffi r: 

;:;;i;"";,; 

"" ", ,;,, ", aui ^",n"a.,"0t . ,..,", p, e.,citu' 

;;;;,; ;,;*' h" E{t 

' 

n"ron'' p.@i oN 

-i,i."- 

"-^, ^ ^"" -" r"' th!4o4 to'i o pot' $lrn*s ol 

^btor 'prnonan 

tnstftlrtont dLtd hive^@ the su@s ol ory pclt'tr 

bh> @u*d hf 

Tnh ch.pr.r u.l dE nqr m fGB on th. n@remdt of qulily of ininulios 6 ell 6 lo 

.sblish t litrl betuBn incinridtl qElitt dd cI:Mi' pcrfodaM for Prkhb Unlilc 

o$er egioMl ounlri.s, Pblisbn e sry.6 ! uiqut N !s ir s6 @sideFd $ e opc' 

€conomy ishi lioo sn od il dicd 10 DuBlc rhe polici6 s Elqvel bv nains:l€n snomic 

thsrisls !s nssrv Ior oprimll deve lopnodt Dtspite so'd plans and polici€s' lhc 3ov'1h in 

dB euntry wd not susliiMble and s pq exp@lilions This sludv js m eelt ltlcdpl ro 

.npinc.[y!s$ lns inn@c. of innitu ms on Pltbtn's €ononic p€rfomne duing lh' 

Vtn thchrE fl}:]s d inaiuiml tsp@B in 3relri €a6id H@E mo6t of th' 

.hpinol €vlteM aborr dE Elarioship bcl@ innituis ttd st'"'rh 

G b8*n m cJG 

*lio.ol ltd cD$sMtry analyth. lnleollring csllls fM c$s ounFv $alvsis in 

d€v.loping mnomio policies sould nor b, .Ppstriatc on two Aolnds 

On €oMPr@l 

grou.ds, counlry sp€cinc dynanics innuehging inslilurional gbwlh rclarionship aE ldrgclv

isDorn. On l.chni€l grcunds, dEE mid bc dilleMes in h' quatitv ofdd! lioo ounlry 

b country n*ins complde! a bil dDbjous llcne lhcE is ! nc'd for si'gle @u'lft andrvrs 

ds iloln aom a b€lFi umpirisl found'tun lot mlking counq's policv Above all liteEldrc 

still trcks souDd lnalvsis lo clplurs iDstitutional groq$ li'k i$ Ptldsr" 

The li6l prit of !t!dy c@bin.s dilfcenl v'dsblcs @piunng various didensions or 

iBritulio.q inl6 an indcr' io msuc rh.s {tin'nsions 12 vei{blcs hlve t€€n conbined nr 

tm sub indexes ndclv Rnk redsing tchiolcEica and Anti Rc'l sking r$hnologi's ibr 

Patisba usitrg tn obj.ctivc mclhod b!*d o. Principal coBpon'nt tnalvsis overing p€nod 

nom l9s4 to 2006 Tne sutsitulcG tc in runl lgstegad i o o' singl€ index o' 

ireturions cill€d Pda!tu indq of in$nudNli4d sitl toh@logi€s ln fic s.@d p6n' 

lsins ols 6 *ll 6 

Inslituli@.1 imp*r o @tumic Frfmsa it tntinslt 'Mtvzed 

GMM me .dolos/ ro mlrol for bi6 ous.d bv ddogdtu's vti0bl6 Sca€dl tudi6 

ftmpt d ro td innirurioml iop.ct o r.oml! vd lh'v @ld n1sNd mlv lcw spett of 

idirutions sic de vtrnbks @ hishl, cdhb4 !i pol4rilllv ole pdhlms or 

nulticolliMity *h€n simdbruutv incl!&d in Elrsion Thit srudt' usine objctiYc 

asgEsslion nclhodoloo, cr o!.r le tuF spccr of s c4Dord lo o{h 

'nsriluti@s 

This chrpter is dsoiz.d s follo*s: stion I initldlctiotl slio 2 ovcu m'rhodolo6/ 

od 6rioMl. fd indc,t, edjM I @v.6 i'rdies rcsulb ed thci ooly3n, dion 4 Enpin@l 

6lina&s, s..lion 5 R6!lt, dd S-lion 6 si6 

7o.2, Methoalology aad Ra.lonolc oIlnd^ 

onclutions dd Mm"dllros 

In $n s6don the Fs@h sludy focu$s on ind€x dcstipljon, dlt! $uMs, nomdialio 

prMduE md, lostly, w.ishdns dnd ,ggrcSalion m.thodorogv 

10.2.1 D6c.ipdoroflndlc.s 

Inrhissrion d.fi nesrh. domoul.tion of lhc ti lowiry indi*s

,t*lsbi ttrdq ot 16.tdfion lh..l sa/p/ r.chaobd!'lsr|(l 

'ni5 i! m rggEsdc indcr {||1 .tromp.tes lh. inp..t of itulitltirDl F fm.E indidlo6 

Dd cmFis of lidcx of Rr* R.dwi.g Tehmlogi6 .rd d* In&x ol And P€nl *kine 

Tcnmbgks (Se T.bL 34). 

t022.t. t&r ol ag. dt bar.choot.9h.(9lt 

llxLx ohn( EdEiig r.r[mloBi! tu d. .ggr!.rc fm offollo*ing wi.bld: 

t) tnvc$rar prolik IEeing Cotut Vi.bility/ExpNFi.lloq PrefE R.P.ltiltior, 

P.ynar D.hrs 2) t.* dd (hd 3) Todo.., Exhjdi.iti Killin& Polidcil InFiffil. 

.nd Db.Dla|rM iidi6r6 4) c{rcffi srlbility dd 5) ddliw @sr.ri.lr ntn 

wishG in dd( rdNing Eclmlog/ iture26 lV l6vq231\.nd |8t(GPeliE . 

ffr t4.Mn 4 Mn t'b., ttud,..ra, tut r.wr 

fl In hr ol 

^rd r.rt *.r t d6lo|Y !i 

ql! 

!Pl--!4es$lres!!lL-_ !!! 

r'ela.a',v.'t@|hi 

5 npP2 9.lhlel@rFdtlo. 

&g__d!teudl. 9l! 

3 sl r'rds or i$ i.d0dfl r.d6Ld6 0.5 

t tldl l||vt'rl1dtDnk 

rdm, r'niuddi { n!,.or 

.,,,c - - Db.mndhddd 

3 *r Gdhroddc

70.2.7.2. Inr,et ol And.R.Dt se.kln' fEhnoloolet lAIl 

Predalory Enls crn be ssinej though weak instilutionllialion of risk dducjng lechnoloeies 

as erpliined ecrli€r. lld*evcr, lhis oonNnonl.xclusiv€ly lbcuses on th@ @nb sccki.g 

opponunities rhar ei$ due to loopholes io inofieclivc or weak i.stilutions lt k ebdivided 

inro lhe follosing componenrs, l) Durcsuorey QMlity 2) Cotruplio. 3) DemNrric 

A€unr.biliry 4) exeutiv. Mrui|menr 5) tulitical mmpdilion 6) Pohical rights o.d 7) civil 

lib€dt r Th€n weidts in tndex .rc tavo.lr\ t6vo, tsrr, l6v\ tt \ rlvo Esp.crivclv 

D€$riplio of Ptkisls index of in$nutiodli4d sidl l@hnoloF/ dd ils subcmpo,'ents 8ts 

1o.2.2 Dat Sou.ces.nd D.s.npdon 

vdiad6 u$d i. @NMim oa indiB d btcn fDo vsids d?n. st6 Moc pMiMl 

is Polilidl nsk srik'r ini.tuiioMl ounrry risk B!id. 

sEs or snmic findcial ind F 

(lCRc) lt publist'd ih@ epamL 

lirical .isL on mo.ttlt bes fd aboul 90 outi* 

ovcmll, 22 dsl irdi*h @ cmbincd i o.bovd..iion.d lh@ i.di6 rrcD lh.e 22 

indi€roii thc teEfiq includ.d 6 indioroE 6 vdi.blcs moslly mduing p.litidl risk in 

cErion of ihc |!s.@h itd.x. As rhis dll{ is pFptrn d Fonrhly b$is, tne Es@h.r Bs 

l2 nonlh lveBg. ro 6nd il b unull fGqudcy lle vttilblcs ofpoliliBl ndui. aE 

bkm nom POLTTY 4 pbj.cr mdrg€d by Ccncr for sysllmic P.@, lls dot! is oamnull 

fr€qFcy avribblc since 1975 md h{s cat$lilh.d il!€lf a 3 k y EbuE in politi@l 

MnoDic liLFluF. Dri!oftoliti€l ri$t! and civil libenlB aE Lk€n lion Frcedon ofdrc 

wtrd inde\ pDblkhed 'nnuslly by Frcedo'n llous sincc 1955. The variable ol TonuE, 

Exbljudicial (illiis, Politiel lhDii$nmcni, and Disoppadtue indisloa is lak n lion 

Piysical inresiry inder conrosed by Cinsonclli-Richards (ClRl) Hun"n Righrs Dabs

@|aini.e lMd nel s dlr! for 195 mnlrics, unully lidD 1981. DeeripliN of v&i.bks 

!s.d in ind* e ircluded in t ble 15, whcEs th.ir d.!ih c sivn in ApFtrdix C- 

re :t5: tu cMnbt.d e. tsw.l 

10.2.3 AggEgationMelhodolollet 

The l€s.slEr €mployed siDild tggregrid n.thodologid 6 usd in Praious chapteu in 

.dim of p.rel index of 2{D2-06 6 r.ll a c$s'glioMl indd nis includs 

nmrliztid p|c€du6 mvcdins *h v4ilbk inro d indcx unn o zm 10 orc sle, 

*lEE hiEls hlB doxxE ndgq inslifudons ed prc.dE for v&ire pddnion anj 

wiS||l eku|dio h b.s.d o prirciFl MldE Nlysii llorcvd, mlike tstvioN indi4s 

*h.r *i8hts @ baed o. cl8 sriod pdfip.l Mpod mlr6is (PcA), in rhk cudy, 

w.ighs e cdalalcd by p.nnio.ing thc v&i.lB of rin. sirs vlriabld Bin8 FCA.

D.$riblive shistics oftlEs wiable de Dotid.ri in ltblc 16, delails ofexft l€d facloE aF 

p6vid.d in t bk l?. dd rhc mmpoMts of.xf&Ld tnd nllted faolod .163 wilh 

dFod'l wighll @ siq in Ehl. 33 For ASStrstlio'\ $. llgrhd mDlot€d lind 

.ssEsaaon shah is tlt€ sltmlde of Eighcd .d ill|mlizd 'ndividul 

rdhbxt esi,.i- s.dlsr!6 dw.loi/.t Ut Ahtu 

tobt zr: '!do.tu" 6.! ta''t@ be @ dna9acnooat 

indiErou

abb t* lt.td.d td* b.dlv Md dtob 

!4 

10,3. Insdardo,/l Be'itlb and Anal/als 

T.ble 39 sho$ d. v.lu6 ofrh. Palisl& ind.x of instunioEliz.d si.l L.hnoloAid md ill 

eb indi6 fd th. Friod l9tt ro 2@6- Tle idi6 .rhpr Io 'lEN $. qurlily of 

inridim in rh. @nay ()E $. y@!s, .nd @ m!d. wil|i dr h.lp of swnl $i.1, pohirl 

lnd @nomn f..roB which nry go .long s .gllnst oe &dhd. I. P.tin.A du.ing 'ilihry 

gov.mdl politicr! innjiurions w@ alnod mn{xistcnt bul hu od dd.r siiuatio4 cmhl 

of clnDtid .rd bufucdn eftiwi6 nidr slw inpDvmat siSn od tic vd. 

Tladd., .h. t lG3 ofdE indiB in dittcEir tift Friods nat hc dfft io dE Fbli: !.d

f.bL 42 lnd FiguF 9 indbx. towr ql$ dudia lh. milihty E8im. md hignd lah6 

dunns th. polithil Fdrc. Tht lhowr lh.l dudng ln. Dilir.ry EgiNt lh. ddv of$@ of 

thc innitudoB is v.rv .otisbh s Mo.,!d !o tt@ in d@nric solfmdlt Fd 

cm9l. d* itgihni@l qulity inpovld sh.rPlv nom 1986.89.Id with s.llEturio 

ituMsd tunls dd @h.d i|3 Pdr in l9?. Or tlF lolitic.l no.! dcdddtis G. of 1988 

rol99 $* ! @Ni&nbly hign r instnuidl qu.hv inLx lh! 0E d gowncd ht tt' 

miliirry dictddrnipt. sd* Fiods i. ub .n c dso pcMiv.d eitl highd ld'h of 

cdruFion, wos holn odd4diliom dd polilhd innlb'lit . 

tdL t* tL d5o ria.r o/rsrtutb..r!.dJod!, t d,tdlot.d nt !t 

Ir l93a drrins miliiiry sovltm|n of Go.El zi! d!. indd h.d dE !@sl insrlodod 

{lB he.@ tn. r€rr B p€cd.d by dE m@oc for E3ldllid of doe@y in 1983. 

Th. yd 1985 d tn. olnr hrd sr msh imFovld iNtihrtions wilh i q!.1@@hi.g

O.5l nm Or? s nd p|ny cl€crim w h.ld dd sists of tt!.silim lo lh. cavalitn erup 

wc wirB!.d, In 19E8, rgldl .Lclior *@ h.ld. dni nili|ltv p.nat lool pow 

Cons.qFntly, dE Fiod of 1983 Md 1939 wilt $.d s bit nc inFwndr ii in'iluliodl 

nN6.]tu Friod of t99091ss mixed tatt lolitiet uMnlintv ud ufh@vft' '!d tlE 

lnsraMiml i'td.x sw . d4lie frq! 0.61 to 0.16 c+4i!ltv dst ttd*ing indtx ohc dM 

fioh o,to ro 0.31- This cldly indictLd s@ md dcdti. lt* ud od€r sld politiol 

6'iiti@3 .fdins llE lrowth of idnrxidl itdi6 HNvd' th. hnscr Fiod or 

&na@y b@shl tuils &d {w highd insri[li@l 3rc b.wi l99t dd 98 (l'igh.c itr 

197),'llE mdmld *B lon in 198 s idncdi.at.nq dE n@l* crs' mcrgdcv ms 

impd.d .rd opild oudlN.rd fmign ci)lrwy ..@ s wc iDa TL diFcffi 

Mog $. pow qih.s imaed .nd!d. .rd culnid.d [o . nilibtv @p d'r.l' 

Cms.qwntly, ttE Corimi@ w hcld 4..!.ydc!, polili.ll dShrs eiz.d.nd civil libtd'6 

P@ hiSl y.fecd llE indlB plonnc.d b loe vdK D.+it dEi.q$isF idlhsa 

Fsftio oa bwr cmp&., bal.r !d n@ pmf*kDrlv mdgcd c.r. agos bd rrE 

inni$[@l de.y rs.l5o DMimnr 

ln 5no( $. d of ttuirid b civili& {k@n v in 1988 sihd.d snttP imEe ( l )in 

inriutiNl qrfty 6paillly lh. Mladl skins Lchnolosi6 imE !.d bt !!o|n 559( ll 

lsEd ld 13 ys (ddpic Dofiictl rt@Limt rd i.l'ndid.l l.6i@ followins n8l4 

blsr) *hil. rlE d lollsld by nilirity trldvd lnc l94t sw ! dr.lD d.clin. (31%) in dE

Frgud 9. r€nd rn l'l"r and l$ $b Indler 

Institutlonallted Soclal T€chnologles 

tEit icE55 $ i{5EE$FE F€EFE 

na Enplrf.'l /|ad$ls 

FrdDiri.l dlFii tb. tEEtt 4plot d OLs sv.ll G oMM ftltodoloE/ bcoftol 

fff lotc i.l bi8 ouard tt oxLlgaN wi.bk. Thn $b..sjm ddcrib6 dnt, tlE 

r!*6id sDeifiorids .lo4 virh nF r'Ertod.,log/ r&4

3 

t0.{t 

f.N. ro: fjdndtonvodot& ttot sffi.d Det|dd 

Rel GDP ps dpiE.t oru.t piie {t $€y6) 

Gr6 dm6u.3.vin6 lx ot 60P) 

m6und p @s taniur !) 

'nnatm, r@ruade {txpons plut lmp.drl .,. p.rten4e 

of GDP. lexp.n, hpon .ndGopllsu..rar. 

exrs*d rn €al Elu.t 

q &sr.sJe rider of Rr,r .edudn, r.{no!!ilE 

rndd ot &$-red €lrm T6hnol4r.. 

Tn d.Fnt dt wilbk is lhc Rcrl CDP F c.pib in @l lem3 TheE @ leo ets ol 

ind.p€nd€nt vuables. Firsl is lh. in$nutiod vlnablB dd sond is mhl vrrilble* Th€ 

Esrcher hd l,ken P.kist n index of iNituiondlized wid l@hnolog,. a well as its sub 

indi€s or Rbk redrcinB h.hnologies dd Anli-Fnt Fking lehmlosies lor mauEm.nl ot 

DeFdmr ud @nlDl veiabl.s srch s tolll Lrd., .rc lotcn 6on H*td dd sMn.N 

(2009 *n@ dheroftl Eirhl* *h 6 Gls ddn.nic evings 8rd Inrlati{tl.E 6k . 

lM woild Doelopftnr lidil:.6. T.blc,l4 8iv6 d.|!il.d inaqrdid .bod rhe vei!5lcs

t0.4.2 RegBioD Sp..ific.tiot 

'lb .$s dE ole of itrilllios qulily an .mBic Flffi 

in Pblislan's @idr, rhc 

Esh.r hs usd st .dnrd sowrt Eg6ion ftwwort *hich moslv follom swlh 

.oDirics lil€FM sh 6 (B!d | 991I Mstiw cl al. l92; !.d r4i.3 atd R4ll 1992)- 

Y,: fn+ pJ, + flt+ et 

wherc ! is time p€riod ., is lhe edr tem. fi. @nomjc 8o*ah , is meNr€n bv CDP p€r 

qpita in E l tems, I irnds fof innituionol vrjabl$, wh€Frs )t is lhe v€tor or contrcl 

laddbls lor olher deGmimnt ol grc*ln. 

otfier d.r.mirmls of gDwlh dcnor.d by t, includ. !.riabLs lo conrol for otier faclo$ ihd 

inoM@ gn*{h. The Fes1 nudy *ill bc using veiob|6 Fnaitins lo n&Igtmio 

sr.bility, evidEs od oFrN M,.!!ct)@h lllbilitv f&lor in erewlh cmpnics is 

nm.llt @plurd by mMd F.ie a.flrnio- S.vins i! Fptlgl€d bv g16 dom€sta eving 

s % of cDP. Ta& oFll,s is EFlgLd by ToLl E!d. ii lcms of GDP tlcsritri* 

Sbrirics ofvsi.bld us€d i. .mpnical lnalysis .F sho*n in Ttll.'l I 

f.,^h11:I,.'d|'dw5.dl'|}6 

9,!1!!

10.4.3 0sdmdon Methodology 

The reurchs rill us OLS s q.ll os CMM po@duE in de @lvst a $@ Dighl b€ tne 

problen or endoseEity airi,s lBn indcFndent vlriabl6 sptcilicallv in insnuftnol 

vdiables ror lhe Edn $d lhese wilblcs hdvc o $ong p.sidve corclorion rith ennh To 

apply lhis nerhodolosJ, $e lbllowing .quarion i3 cslimd.d bv cMM: 

lh = fo+ fa+ i{,+., 

TIF insrM€nlal vsnabbs for the .qualion !rc lwie h$ ol d.pdrknt vlrilble lnd fiul ldg 

of l explmlory voisbhs. 

70.5. A.stlts 

t*|p:,/j''.P.ll.dhtlan 

As qplinen elid, ov.6ll ituliutios cmitod 3!bl. o'! lh. oih.r hd4 gmvtt in 

.omy m6udd by st ODP F qPilo, wnncss.d o liibb incrc over dE v6. 

H6*ev.r, cmDontively hider sro{in w$ eiln.$.d in d ol1984_ 91. In d or 9&, 

inoome l€vel b.M€ f.i y sl!bl., and il shllply ticlcd up hlcr in 2000{6 pciod (FiguF 

l0), Anons other vaiablca, svings Efrain€d f.nly sllbl. tt cboul I J%. Intulio follo*ed 

ircom., €tuined in the sd a bit high.r. Emdincd lowd rhdughout $e mjddle 6 wndesed 

a suBp in 2003 onwotds $ lMmy eilessd a 3i@c Itowlh. TEdc openmss rls

wihdrd . r.bL itE|!& dd picL.d up nl.Mnrn .id 2002 a polbi.t 1omtd3 

lih4.lLrrbr bot dEn sFUDd. 

tu*a*a rabffirffib 

ii-------mr( i[ s^vco mFc'l o'tr| rcDPtc 

'! co'drhn..!rr.d r $.0r1l*l o.ta.dl 

.c.'I*|||!'rt t. th.oc |.'d lxr5,, 

tur 1c IGd h GDt p.r cri. ra h&trn 

Rc.l GDP Der Caplta 

ititi$5 sss t$u s $$E FFTHF 

Bcfd! loddrg d catraid @n* . qt'at lod( d Tdc 43 Flvith. dE cdllbtlon 

@fficicn o.dr 6. tt t.r v.n bb! ii th. ndt A! 4p.cL4 dr6 it . o69 

'!.d 

rdiriw cmlrthd rM! lfiil|d@l vdl.da Hd., F!6ld of nuld@lit|. .ity dld 

.rirc lf ord d l|t. .e liN ir mod.l. 6iaD of co.ffcidtt of ODP .d l dotiod ed 

iafidid veilbb 16 foun b h. ngrtiw ht h3l8nifi{ . Ho*!g Gldou&lp bc$q

stinS ed oFnfts ond CDP *s ford lo b. 3igific.,nly posirira ta y, inflalid sms 

to b. pGtriv.ly rcl.Ld rilh insinnio.s in P.tist&, bo. b dw a t@.ii8tul inf.mq th. 

Eercher p.dom€d ftelq$ion heeed o. OLS ts *cll 6 CMM nelhodologi.,, Th.E @ 

quiE s f.w studiB thrl foud inveE link b.hNeen institltion !d CDP growrh. In a 

simulation 1o inrcstisn& $is linlq lhc tsrchtr EsEel GDP gDvnn wiih lh. ind.r ond 

loud msltivc sirnifrd sien fr ineildids b*king E pBiou lodie R.36ion *a 

hlqdploycd usingCDPpdoDids. Fdyofgto*rh I. ilE.snhdiM pl@duE, bolh 

ot-S.trd 6MM ftlnodoloe/ B4 enploy.d, nE.niruli@ Gulrr cldtly indiorc ! bbBl 

FEitiv. inpat of insttutiod vanehk d go*th ( t bL ,l4) 

D. pznde nr vula bk : n6 DPPC 

c!149!l't: 

FiBr rhe models m Ned on OLS. All vsidblc haw qp€.nd signs dd .ft hlshly 

si$ili@nt, InUolim mffi halinB exp@l.d rcsltiv. sign and sisnincoM 3u3g.sb lhrr

uibhlc m&rc G@mic otdilios h.v. ! Ng.livc .ffcl on eddi. !ro*th- H.n@ 

pudling polici.s of inturid, fit.nc.d 8s{h midi( 'd 

bc ftuitfiil in los run. C@fficknl of 

{vings rle mdB p6itivc in .ll lhd modcls ud cldt lho*ing $vina i! insrurunl'r ro 

gb*rh $ il ituos..pibl eunul.rion !n inv.nnob Th. @mcinl of oFM6 

Ept*nd hy hdc ro GDP h.vins cxFclc, F6i1iv. 3i!n rd highlv sisnifi€|n in 'll thd 

no&ls, s[Ning im6s.d F.d. libcnlialie inp-r gnMt in ! pcitiw sav. 

l. li6t nod.l, lh. tuin iBtilud(Nl vuilbl. s t d.d. llt dmciot is si8|lifi@l Jd 

pcniw i!di!t6 insri'niNl qulily p6ititcly .Id sigiliodv innF6 lto*lh Al$ 

dodFcd is rtE twtl of te lub itdi..s ol iflLx ot P.kisltr i li olinnnrximlizld $ii 

lehrcloSbs nmd, rilk Fdkhg leh.ologi6 i. s.cod hod.l lnd dlisl sling 

tcl@logi.s in nod€l 3, All cx€pl di@r 5..tin8 inds tdiN lciriw &d !i3n4f61. 

Thjs slbs &ri Ml sting lehmlogi6 .r.lsgh anpon ,l|, do nor plbde imF.l on 

gNih .lonc hn slEn Mbi'Ed inlo .88Eg.rG i j.* The cul|! howdcr e in @r!n 

witt d dlir Nlre 6 cB @untry dltsis, 6 t!dsi.8 kcrtubgb & piodE r 

an!&r d dmic Ffol!t|'E. In 8ow$ nodclt dEc dighr b. wi.bl6 dDl e 

c loedds {t rrnincd l@ ff,rG wihin modcl, In .ls ctlcs, iGhndts @ u!.d .o 

olil rhG por.ntill pobkn of..dolg|iay. In lhi! .sin.lis b8cd @ cMM' fiut lid 

sc4d Lg! ol d.Fi&n wi.tl. .nd lid tlg of lll ind.?dddtt wi.U6 e u$d a 

inomaE, tn modcl I lo 4 slimane ft. Otl E$lls dE o@ll inLx ol insitulio6 .nd 

n* ldBing in&x !a ro rianifimly innEEirg !to*n. Th.ir sisdf.s. lar rl$ 

i!@ed. Tb. rir$ ololhd rri.bk mt only 6.in dE ffi bol dty bcon. .h n@ 

3E i6@. Tk oEnll cdt m3imd umh.u!d, 

SMminS up, rh. ov$ll P!*is.n indd of inrilldMliz.d si.l r..hnologi6 ha . 

3i!ni6s. (F.itjv.) inn{.@ 6 rrewrh, Ttu sinilr @h B wilB*d in m ol its sub 

i!di6 t[ret n* Edmin3 rehmlolils. HoMwr, Mri-mr stirs |'rnnobsiB mi..d

inistrilrcor TtB i'!nn!ri(El i.di6 e .l$ @p.Ebh s ftty . nlG sifril{ tu8. 

b.tw6 O {d L llE highdt @6cid o M ni. iflld cldlv sho$ dd botn $b 

indiccsd@ cMd !rod@ G n*h in[U.@ d gtoMn s wtd dF G dhin'd' 

70.6. Concluslon 

Th. 6ulrs tu88!d ! dMg lint b.|en i6tit idl qulitv itd ffiic goMn fd 

P!&isr.n, H@v.r, h @L.s b dtid @lE,.nli dl sking arLx bd.m intiirtifio!|l 

tnil. n* Edsin! i'xhx drr w iBig.ific! in @r FwiE slldidt beft siSnifd'n for 

P.lis.n. Thb mEF th.r @ ry speiff, @lc nigh olft.qrnc. dif*nt .4lsioq s 

MrFd b c6 cot i6 NI|! ttcic.. @nltv 3lcific rldv wld Fovi& nc iNignl 

fd policy anDlicrriN, Fo. P.titra n{ Ed*ing itrgturiN lilc p..r4dd of pdFnv 

righs dnd .nl(ffil .nd Lv ud or&r G fs Ie imFdet fd SDMi s mp.Ed 

to dl scling insriudons lit mpdrn . t{EDdtic iFlrEi*ls HNwr, t's 

Flicy nighr b. b snglQ bod loms of innnudN .l ln. $' rim in ddd lo 'hi* 

slsr.imblc &rcI@rdt. 6 th.t cmbin d .ff*! in dE lod or P.Iis1!n ida of 

insnlti@tiEd sad t€hmlosks frr outscid$ l|E dnt No, In n !bs.., .Fn b6r 

Dolicid fd &slopft'{ od ltrt rin8 hrcJtt'd migl fril s @ i@ i* 6 bqLE d. 

hu8. b'6iB ,bk ltd qld ti$ if Flocny 

dsnr3 e .ol sold od dt*l 6fo'@c'* 

i. sd. M@*r, tu or.mDdor. mpods diver ey Fricv inotiG 8iH b 

.r!!e.qo6 rMrdr Efl sl6 Ntins 4otmr tul an outul n3iliti6.d poricv 

Th. dha c.rtll v&i.bl6 $os t||rl h&@mic nrbilny, svinls ad oFts .l$ 

h.w si9i6c!'r ihp.c 6 4o|Mic go*ln of Prli@ a lrldicrd by owy.

Chapter 11: f,,yplo ng causal tlnk between Instltutlons and 

Economlc Growth for Pakstan 

fhb lon chdptu kw.tsob @@t Eb.tutitp b.tu^ tunuuoEt qlatrv ctu 4tum 

ettut@ne lot hkhbn. n .'Ptored 6itto 

@hbqtutton te.h^tq!. vttih ctunger @lsottll 6t ts used to etobhsh ti' 'Mot ti'k lte 

deorchet klnd c@.ne al to^s ruA 5kteotdn^t rctotbnshtp omry tnstltu ons o^d st'ah 

wlEtut hnl tuh eusdtfty k h!n4 b br u tdk .ttonot ,trh hnftufit'n tnpo'thg orctuh Howvet 

thert n no sh.a run 6lsuu ton tbriturta6 b srctuh o^d tu Eto thtt4d' wbiaobt' 

ftrtde h @,'r's Ltuh. ktê k's nr @utd b inlueE2d bv nE wndnns ot tEth6td' 

17.7, lntmaluctlon 

The numan gMl for ccMomic gD*rh and devctopmml is ldgelv and posnivelv itfl@dccd bv 

the sLt ofpavlilinB ininurioG Thh ELtioslip is snsFr during thc long Em sFsln a 

mpoad !o tlt shdt &m Th€ ouslirv b.ilan inditotim md @nmic F tollrre is 

rle r idp.rLnl issuc, ud nudi6 shN thd b.rcr insirudos l.'d b a nider iMm' ond 

nd rhe olhd wly oun'1, lloweler, int.AEtinS resuhs fim crc$ counlrv mdvsis in 

dereloping econmio p.licics *ould nol be lpp@priat! d@ !o coDntry 3p'ci6o dFmics' 

Hd@ rh€E is n@d for sinsle muty mlytis c ir cd im a t€n'r dpincd foundarion for 

m6*ing Mr.y! policy. This chapb *ill *bd rh€ flpiridl nudt dorc in pEvi6N 

ohlprer, explori4 @inlegBtion pmD€ni6 dd mu$l link bd@. iniilulios dd Smwlh fd 

P*isb. Irlorcne lboul lhe long run rc|. of in(irurions in asonic potlomrnc', b€s€d on 

€sEsion dllysis, mishl b€ nardd 6p..ially in pr*ne of no!_slltbiary tine sei6 

Mtlmv.r. Es6ion .rB 'ot inpt dNlilr' h michl l€ll th. rea!6 dt dldrimhip 

baven d.Fndcni .nd in&Fn

innio.iml oulis lor Patis& 6 a ie. sudi6 'sl doL b.ss sd idi@ wnich cove,Ed 

orc or f.w .speB of$€ iBriturioMl quliry,'llk n!d' cmploys Johtuen_JKlius @ 

inlegdion kchni'rE { ihe CanB.r duslhy i.st lo .xplG ine dusl link b.ed 

insli1uti66 sd snomic pe.lom.icc on rhc mnutl d!6 lor Pa*islr. econm, over the 

period 1984-2006. For lhis pap€r a lhkisbn ind.x of insrilulion.liad $cial lechnologies, 

developed ln lh. prerious chopter, is used lo o4$re lhc ihstitotional quality in Patisran. Irtis 

index is mde up ot Ri st roduci.g tech.ologics Ant i-Rent eelins t.chnoloeiB The chapl€r 

is orEoiad as fdllo*s: srion 2 Dre$fls an ovqvis olquolity of ins{itutioa in Pakis&tr; 

Setion I p€snll $e nodel ed ccoion.lric lechniqu.s dd d!L desnflioq sdion 4 

p€ets dd dallus lhc enPnaol fitrdings & , linalu srion 5 pEst ! @ncludina 

17.2. ovediew oJ Qual/l', oJ t,tsaldltlons ont Economic cmwth in 

Tabl. l9 shM rh. valB ofrhc Pakine in&x of innn!turuliz.d sjal tahnologi6 ad its 

$b irdicG 16r Pslhta lor lhe p..iod | 934 to 2006. ln Pltisbn, du.ing 6ilibr] Sovem.n! 

political innnutiotu m almosl mn

tol999 s* r msidodbly hi$s inniturioal qulitv index $sn th..E gov€med bv lh' 

'nc sddd wi.blc gD*lh in @ony nduEd bv @l GDP p" 6piio wibss€n t st,bl' 

inc@e over lhe ye.6 lntetriinglv, o comp.dlivcly high€r ghsth was witEssd in eE ol 

1984- 9l Nhe|g in lhc.6 of 9()n imd. lcv.l belm rtiilv sr'bl', a'd it tgain shlrplv 

pictcd up in ttE zm{6 p.dod (FisuE 2) lt m.@ hish.r so$rh in th't D€tiod *'l*n lh€ 

instilutiotul qutily wlr low. 

11.3.me Modelmal Ecmo/',etdct crtnh@s amt Doaa D'Yription 

11,3,1 Model specncadoD aDd Drt Description 

-to cxplm rbe ouelily b.rwn lrclitulads dd Co*l\ rhc Eg@h'r Es rh€ following 

y,= fo+ p&+ frrz r p,ot + €t E.l 

rn. subs.ip{ 1" designlA1ire teri.d,// 

is ul cDP per dpita I! rpr'senls instiiotioal 

qualaty. A it is infltrion, ol is oF.n6 llwtld bv total hde lo CDP lnd e sF*nb is lh' 

ctu Lo. tuotnor .qulion is lls given 10 .se$ dc sFl linl in oppositc dirlioD 

It= fo+ f D/t+ f p+ PPt+ q r,e2 

HowM, irfmE b6.d on eiimlion suld tror b€ v.lid in.be@ ort oint.3Fting 

rcllimhip. fi@ hid'l b. dh.r nbdelt in utor db Es6ion (vAR) frnm.vd* 

involvine intlalion or op{nness 6 dependcnr !..i6bl€s bul lhcv risht be ireleva.t for rhis

Fdrt ir6litutiNl wi6Ls, tlF lgthd hs u!.d P.li3td iflrd of indinnkn.lizd sirl 

tchorosic3 s sll s its sb i'ni6 of Rist Edeiie L.ttulogks .!d Anri€! s.cking 

t@hnolosi.!, dcv.lopod in dF PEvios oh.pt r for D*uMdl of ins1ibti l qulitv- Irik 

indq rd h! 3u! indiB G boill d lbodtbt 6@wrk of @tr-t !d Ft.|lrorv tlwi6 

s.a by t{onn. Tte iidi6 E in 0 io I Fng6 *ld higls ulB irdic{ing b'flq 

insiitutioml qulity. As intiNtiml indei m8!s b.rwn 0 ud l. th4 miSl$ bt hug' 

.h.G f6 itldd io b.3Lllod..v In lhie @Er\ dF t.*na FfnE d lnt* lo3ir 

tufordrio b ndc ltit i.dd dws. windn [EiL Ind.lid t& k rE{!d a chdg' in 

@lEMq DriF indc! wheEs op.ire$ k m..!ucd bv iottl lt d. (Exponr plur InPoi'ls) 3s ! 

Fenl.'g. ol CDP. lnde. F*b.Lr.E l*4 tom tLso dd SmNrs (2009) 

*ts* hturio {hh ir i.r.tr frw wqtd D.wlo@a* Itdk tar T.bL aJ tic &hiLd 

inlmdrlon .boul the wi.bhs dd Ih.ir d.lr o@

11.3,2 

rot'L 4s: Ddb to!rcs Md ent, M'Mttto^sttk' 

n""teopp...p'"1-*u.oa.'plp 

.9!E!9! !!!!qsl. 

- - 

htuden.oEumaipda4pnurrxl 

rtur tnde (tlpotu Pl6 hFcl .r . 

perc.bge ot 6DP (etpdr. idron |ndGoP 

firur8 te erpat d in or Y.ru9! 

EcotroneFrc Methodolo8t 

!9!{9L 

sumr!q!!qql 

-lb inr.cigtE the caEl €latio6hio rh' lrgNh'r tug chekcd fo' th. did'@ of unil nDr 

i. vdds or&d TIE evid.nc. oa ointgdlid lmng vsiabl6 6 $d cxploEd t'd 

h.ving fdnd rhe .vidm th. ed co@rior pop'ni€s of dE long m EhrionshQ ms 

lr order io have sne de.nilgful Elarionship anong veilbles' rhese vaiabl's ho*evd nor 

3tltionary.1ldel, shduld b. slttionatv in di'I!rcnc' lom Augment'n Dick€v Fuller (ADF) 

t sr is *id.ly n$d in litcldure to ss*s srsion(itv pop'nv of variabl6 sp'cifidllv ii tts 

rhc Nll hyporhoir s b $hclh.r th. *lIicitd o in lh' folldins alurid is 'quor ro z'm 

*tG6 . ftgiivc *mcidr wold flil lo sdis& 'utl htTod6i! maing lh' triabl' is 

5blioory, 

Paklsbn hdex Indrtutio.rlh.dsochL 

/!- fo+ ftt+ olrt + att ltyd+cl 9!J

Iteft ./ i "4i!e noie eN. Lm. This r.sr ues th. stolislics povilled bv Dictev and Full.r 

(t979). HouoE s.lt enpL rok6 this Bl mli.hle (Dejon8.l ol l99?; md Hdis 

2(x)l) s n DodU6 bi6 cuh in Ems of ov.r Ejdtins th' null hvporl'6ii To er1@nrtr 

|nb pmblenl' ih€ Mh.r gill E t*o tddilidtl lcsts mclv Drclrv Fulkr C'*nliztd 

t .sr sqDm(DF{LS)&d Ng-PcM 

'l]lh analysis ains to find ! gable long dn rcl*ionship lmonB variabl€s ltese vdriables 

how.vei mn be spataled by shocls, hut th* ihocks *ould bc havina 4rc med r lona rn, 

whioh Dcms lhcs vdi.bles would nolc rogcrM h log tun ln lhis studv, a *i'klv usd tesl 

proposd by (Johosn 1988i tnd lohanen lnd Jeslius l9$) h"€d d ke slolisticr dd 

€igen vlhe slarisdca is spplin, *irh noll h)Flh€siE lhd ii ln' tllB of bodt sltlnics 

3hold bc zb hcre no oinEgdio TlE di el value lo Bt rlE sigDif@ e tfovidcd 

by M&Ki.m et al- (1999) 

v..6r Ew-co trt.r lon Mo

un, eh.l6 t Fsilite or insi$if@.r !:CM @mcicd dld suggBl lhlr 

b be p€@., hce no elnlioNhip |ts cmcienr is FpEsrtol bv .r in EquriM 4 and t 

tt=. + t elta+t + PtTta t aAtu + t alod 

tL-r +to4)tp + t Ltltl 

+ t(td- h' pd- t/rdo,) +'' E4.i! 

+ 2.tdpA+ t st.r'd+ A(!i- I,.t - 2t t - lproA + q DsJ 

WbeE ,, repres.rs fi6t diiLrcne' , rcprcsn$ lhc cocfiicient of ECT c rcpre$ms coNE 

lnd ., is while noi€ emr lcnn HeE $c ching' i! dtp'ndent variablc ls a fundion ol 

chsg€ in olher ltrilbles .s well as shdks in coint'Eraring rehtionship repr'senled bv E(]f 

This .mr orrErion pDp.rtv i3 nol onlv us'd in tunl*r sten8lh€ning th' cEdibili$ or 

cointsElion omlysis, h{t n als s6 in ldlynn8 c'uel EhlioBhip thNgi Gr'nger 

ResBim mlFis shows th. ehtaNhip bdr@ {tcFndd' dd it&pcnd'nt vdiabl6 bur 

dds nol inply suelirt C6naq (1936 1988) {Sg'sr thtt ifvditbld tE ornEstrd 'n 

AR(l),lh.n.heE {ill eirhq bc. unidisiiodt orbini@iool eusl Elttionshi! llor€ver 

carslity .esls Frlomed lhourl vAR *ould nor b' oFdibl' if lh'€ G a coinree€tina 

rclarioNhip (Engl. aftl GEnser' 1987) Bul lhis pobl'm could bd solved if lacsed Ecl is 

included in C@ger .tusalnv |csl p'rfom'd on VECM equalion fhe signinance ot I 

nrisli€ of c@riic ienr of EcT (l) elk ibout loiS ru n cluelirv {hereas F Sbrir'ics o r i oi'n 

sienitrdne of all $e lass of indep€nd' wiablcs undq inv€stiEalion usins wald t'i 

co.vcy aboul shon fln dvnrmics ln this wrv borh shon run and long run causlitv couLd b€ 

found in borh diEctons

77.4. Empincal Rwlts and Analysls 

The tfis pan or ft. lMlysis is ro .sss th. 3lriotuitv popefiv of wriabl's Thc Esat|:€r 

fi61 perrodsi ADF test M wh of lb. vs.blo on b.$ level $ well as fi61 ditfdnct fms 

C.itiel volue for this tesr is povided by M&Kinnon (1991), Th* l€sts @ sd$led *ilh 

time rend ed widsr edd Ov€6tl Gsulb prcvid€d it 1lble 46 indicare variabLs fte 

ctoces ofudn ml at ldtl bul sbtjoniry in $olr tist dilTercde 

fork 16: u!$.31.r E thtutt@ luon nba o&,.r rlr.t I,ar,) 

.r.rsKidm {1991) oclnbd 16l- 

a!qe!l.]: 

Thc ke odd elelid in ADF cst s rcll s odF ic*r is hdtd d S.h*@ Infmalion 

Cnl€ri@. This test is nt bbusl for sh.ll s9Ls, dEtf@ tne EsMher Mied oul 

sddiriml &s of DFcLs ed Ng'Pdbn. 'l1o rcsulIs @ 8i!.. 

in tlble 47 dd 43 

As it shows iNlitution vdbblo is slttldary at l.vel, bul when tttnd i3 included' n bam6 

sliorory !t ffd ditr En@, Rest of tn. v.riablor |l3o b.ooF. si.tiolrv ar 66t ditr€rcne 

Thc o!d!l lNlr sueeest mn rul l.v.l bur int4r.tej in | (l)

ertt .r: tfft ad B&norh',lDt Lytln rctstE,lll 

r-""mG ; *q*** i.hrdb"'r'd-ntututut 

fdb/|tt: u.tt*d E dn ttd l{''ritoritrl 

a 

t@iF| L fiirt:iuF L!3,!1"i:: -!t!?!!4:: _-l 

! 

I 

L t 

L-: 

an r Gssing rhe slrtiodiry pdp.rly, th€ tlsahqr dploFd th. prcsc of oinLention 

mong vdilbl6 by mployinS thc lofid$ (l9tE) &d J.,h.En.dd Jelis (1990) 

lrlccd@ bins dE tu sri.ric .ti drimd .igqtdr H Th. I*lls of dic 

@inrEgdrid rers cmrhyins tuldwnl. VAR nod.l (RcDPFc, ltSTPK, INFCPI tnd 

OPEfO c eivd in Tlbh 49. llNcg, th. E$lt of @inLsiti@ Ed is innurc.d bv th.

l.ngrh of l!8l. In lirrrurc lh.E Gxist . numb.r of su!a.!i.d ndno& fd ch@sing tl'. Ia8 

ordc6. Hcrc, u At it iniof, lio sil.rion ws u!.d {l!nb J0} Thi! sggrsls No hgs of 

f.h!. tttt tor'l,dn"fele nu ,r'.d,t $.en v.aqt 

. tu 4l* ale br*h d b aot b-t,i t 4 a 

'^,drid.u*rMlttrP'ab 

r.*e: tttetd'.J.e,dffiEvB 

Tt,oho$n.nd,rliB{l9ro)Fu.duEo findbullipb6int gtlla.B@M Thcre 

ilrinic in t|bh 49 cx...ds lh. I Fr ql cndd ul!. clalv Fj@ring dE trtll hrtorhGis 

of no, d. or ks lhs o., t$! or 16 thlt (wq t.d lhE d lc$ ${ fie @inlcgdlio d 

l% od lnu indicllins th,l $cF Gxin .r k5l adr @i.r.{t ti4 veroe Wh.E tuinu 

.ird nle !.ri!i.s !l$ 3urporr3 th. sinilr dclsi@ Ej-ling dll hvlo{idis of no oF 

d 16 rir o'8, .nd ihF d k r dd de {i' .amid tl r% homvd, n w of Ejatk' 

of null hlTotlFsis of so d 16 ths leo .1 llM Lwl- Th.EfN dE oEnll sult ws in 

nvq of l,3 ( n@ @int 8ntibn.t 

5olo lcval oasignifiqM,'ftc linding of@i cgnrion 

h6 srcml implicltios, Fi6q ln.E olcslt k r long dn El is$ip llMt wi.bl6, Ths 

lko trfim th. possibility oloNlity ed rul.s oul di p.sibilily ol lpunos coftl iMs.

The Nomrliad CoiiEeElion velor in Tobl. 5 | shoss lhe posiiive MtuE of elaidnship 

bc$en insliotiots und grcwrh. Ale lhee is I posniv€ EhiioBhip beN@n op€nne$ and 

gro*d, od eSrriv. Ehtionship betwe. inn.don &d so*d 

r.t* sr: 'gfiot d cah.rtdd da 

as expei'd' 

OG rhe Mlud ofoinLgririm is eilblis!.tt wc csrim.r6 vEcM mo'l€ls otcqDario 4 tnd 

5. Ar dplaincd arlicr, lhis EgE$ion €plutul nd mlv El4liodtltip wilh i'ittF dcnt 

v&iables tut rl$ copturcd clEnse in disquilibrium cmr @DtuG b, BCT Sp@incollv lhe 

nd diuercnca of{llinlelolad tdiableE is the |unclion orth€n hsged di'I'ftn€' 6 well as 

lagecd ECl . ln this sp4! siE tne ECT b s[lioMrv tll olhs vsntbbs @ ttso sElimry' 

-ftis inpli6 tll{ Ol,S surlrnl e|]c vill tl$ bc @si!'nr md cfficidl 

rot .52: t@Nry ai ar@dor 6nnt tNetry,* 

Table 52 disphys Bullt of insliffio grcwth coueltv fd both shon run s w'll 6 loDg dn 

fie Fsux cl.ony shows sisrifiul nesstilc ECT .effciqt lor cqulion 4, whcE6 pdilive 

i.sierifi@t dlfici.nt fd oqurid 5 This surpsrs a log on uniiierioMl aNlitv 

trming flm inditulio6 io 3owrh. Howd6, m log M gtuUd auelitt wG fond in 

ogposir. didior. Ilcroc! iEtituii@l qulily GdnSer clls gb$rh in thc log m hr 

Crcwlh dcs ndr e!$ in$iffional quality h long m This suppons thc imDorLne of

in{illtloB fd lds run @mic FfmtE 

of P.rii.!. Shat tu dvMi.t @ opluld 

by rh. Fd.ristics of W.td 0a3! dtc disobys tlF hi' signifi..E of L!5 ol ps*lh (A 

RGDPC)od In tnnidrl wibL (A llSD in l(l) qth.. Th. cd-!d'd F Sditid ofjold 

lAl Cwi tht bs of lntitulio,rs @ i.lisnifr.n b goM! .qodior ( l) cqudd od liss or 

aDw$ @ ds iGilnift! in iliin iN.qDtior (2),'16 ds! is m stdt M oulilv 

nun i'dinn'N b 8o*rn ad vic. wE 

'bd*.dqb|J6'.rdrulbrnur.F)rdF 

',*|n.hldnl|tudrra.dd4ltrer. 

tL**{rtfuub"JlYt6 

W! d$ Frfdn d b.ndy of diryFdic l6ls d vEC Modclt Fd t€J! e MdeLd ro 

!93 shcrld ll* cq'tdN e te of qM Fr.ining b tundidd fonn 

oisip.cific.rirr Dro.oftldidr, M.lity nd *nil. hdq@.diricitv R@h5 d'picLd 

iqtr T.bL tl cbny sho*t rc didaE in lhh Eg|dl c ioll hvDdncL of e ffi i. .ll 

dF c.s dld lFr b. Ejdr.d r l0?. 

11,5 Collctrtlol, 

In dri. Fpd, tlF |g6lF h.t .mii.d dE qu..do ol th. qality of inditttid.' G6!lgc.' 

qe e.Mic shvdh d ,ic. E &. Speifislly, n inv.iistL ldg M oul lint t rw

th. Pakislan ind.x ot instiuio"liz€n sNit! Ehnologies ond ercnmic p.raomsne using 

annul {llb lor lh. pci.d of 193,!2006- lhe resNh csib i.dicaL. cl6r long run 

@integdio. Gl ionsnip h€twer inniMios od !6*an fs P'tisln Th' MtuE or 

€elny d shdr on dynmi6 opturcd bv VECM and gdecr @slitt lcsi indic'le mi- 

diEdional ccuelity ndn innnuions rD sro$hi 

howcver, .o lo'g run cauelitv, in lh' 

6@s.r *n*, *6 loDd in opposiE diBlion simihrlv, rheF is no shod rut clrslitv rnn 

insliruti@s ro lrofih .nd vice ve@ Th. policv imPliqrions $Eeest thlt in odn lo &hi'vc 

3Mimbl. @mic ao$rL polni6 fmBins on lds &os sels shord hc ddign:d lnd 

inpldcnt d fd Mpte, rhe craljn oaond potirh.l ud $i'l in

Pan Gchaptea 12: Cotrcluslon 

Thi! qn|'nnE dtptd @pind.t6 dE oblqiG of dt dEns, 8i6 ' 8a61 !'roMl ofllE 

nFnodolos/, di* |n. din fun!{, .'d diB dl dE im@tr.d Flic, inrlidi{N oldE 

findiigs lln d6!! ddls tlF itraori.t i$ of n|dnne qulnv !d cfictivg* of 

fmd i|stinniN sG ddri..!xl qlpittdlv &s dFi nigd o s$nirlbL @mb 

g!o*rt. lr .ho .xpld6 dE is ofu{n|iDulrv ofSto*lh ii &Elolinr Eeid!' 6lcidlv 

in P.lisr- d liils | *ilh tlE qdity ofpd.kd indin|tiE 

Thb .hDi.r iddts sF.ifolly {E is6 of ( l) qtnific.tiod ot itdiuniorl qulilks rd 

cfi61iveB&6@mts l|d old s6E! driw iniilliod 6Firo; (2) Wtrcta 

inlinni* rE pivot l td hrg M $n imlL dmic gwlh.d (3) WhclE irriuic 

phy ampo|bnr rd padrl ol in dt effiic drrmics of P.lli!. 

Th. Firi is s |sri.d by .aSEgdln of ditr sl n|dc of iDtitria in ftt! of ifl''r 

of i'diiniuliz.d $hl L.imb8i!3 speifi€llv, il c.{'tc i'dindo'l qu|ni6 ofmos of 

tnc cMtiB i. 0F rqld b rs i.di6. TIE frt in L,( nEG uul inniodnl qillitv 

fd 5 yaB In D.El lm, Thc sdd itldd( b of cc sriNl Mru!.' .d n..,G gcFEl 

quliry olintn|niN6wins f! |tF @nlti6.!r.t dt|l 9||!6 

IE sn is ! ddc!.d bt prodEi|B dtFni.d eritui6 of @6 @rlav t@$ trFdck 

6liuin8 idiuritul quliti. Enrg in&r of llritllidtlitd $i.l l4lmhgi6 a sll a 

dls inFri-t hd..i Tte .dtn.|6 c ol slot l Dd!!r a *dl 6 h tlt F!6ocqiw or 

dddor.3 dbB lo |ss dE Lct ofcdwsaE F.dioLil bv min*d Srsrh osiB 

ft. d'nd !s s d.rE*d duugh d.sLol's saec oftlreddd qulli!. fd P.tirtr 

!d aDni.l eidt of |ltnoL i. ti.6.|mlc pdfdrrcof dE.d!|ty. 

TL tlEis 6srr of . si(s of dy3 o liiiirids .d 6dr inFl d t6n{|lc 8@rn. 

Thalfdq ad, !,ilIlc.l .htd (6lD hs s li'diddrl .!i.dic !d. +@ifr

nelhodolosy to &hicw lh* obj*tives In dt lbllowing patgnphs, lhc rcsrclEr will 

suMi4 th€ obj@iver nelhodobe/ and fitdings of @h 0mllaial ch.pu 

chalb 6 pasrtu .. idex of idiNrio t4n sill @hmb3i6 dnt k m'dq uP of No sub 

i.diEs @ly Rilk RnNing B:lsolosi6 .nd Anli RGni e*ing lehmlogi's This inda in 

run, ole6 s.Dl sial, innituion!|, lolilical od @omic $P*ls Spaifictllt' il 

an€nprs lo ch$ify snd m@u€ vorious D?6 of institudons bosd on a lhcorcdsl fmmdork 

Ths innituion6l i.Ili6ro6 e then assF$td Bins Prircipal compon'nl @lvsis The 

index fG 8,1 anLi.s ld 5 ys6 is c@t€d o*rins lh€ penod 200246 |t lhis slud, ahoul 

14 dill@nl 

ncaslG e us.d.n! de N ageEgden in 14 indies ndaing 

'nsttunidll 

innitulionrl qualily. tn a sinilr nmd. th.v aE aeeEsded inlo cmpEhensile index of 

i.stitutionalize! so ia l lahnoloeies MoFovcr. *nsir iv nv dal'sis tts D€tfom'd 

lo ch&k rhc 

reelrs usins di|l.Ent agsEsaiion tppr@h.s Rduh emoined quitc sinillr pmvins 

iMbitivity ol indcx ro*sd reisndng .nd .g3FearM, 

Chrpd 7 cxtcnds ttE in{innional @v.E8c lh.l Nd |nnftrn b 3'l vditbles dE ro 

un.vailabil ily of @tin uous dtb of live v.a6 

t torevcr, on@ ihis oondnion is dopF4 a rot 

more drld wrc.s on b€ qulified lo b. itoludcd in index Moftovct ii3tirulioral qualilv is 

obwed ro be p.6hcnt ovcr time, heM dopDing timo c$nction niSht iol ruL mxh ota 

ditr.dc lb olilalia o th* hugp voluG of &na $is chtptr ttdtct lhe ind" of 

iditotioFliz.d sid l*lftlogiB ovding fd nm d.L l)lllg ttrj indic's, ttd 

€mployins sinilu lsgEg.tion 6_.mewotr ed objstiv. w€isl ine tehniq@s fiis index 

sives cns scrional esrimal€s or insrilutionel qullilies ol l'11 munti6 Aboul 100 dlra 

suEes @ ddoycd a& dch 6Dty .nd aglr8rkd inb 3? indies ndsuri'g difr€renr 

aspEt' or iniitotim Tn wia!16 e in lm of ,wms6 @wnn8 fi€ pdidl df 1995 lo 

2(x)9 *nh emc veia6l€ avdaging up ro l0 y@ whilc m d sinSlc ve 6dndd

&p.nding on rlD availabiUry oi d.t!. ln lh. .nd, deuiled onD€risN with olhd mdor 

Chaptq I expbEs innitutional ercn4h n.xus enplovi4 index or instituliorolizd sNisl 

kchnologies (p€tel) 2002 {16 Advsc{t {onom€ric tehoiqus m u*d lo mak' rh€ Esulls 

obBr to porenli.l bi6 car by endog.noN snd @i .d vdilbles s *ell 6 @urry sFcinc 

elfdls For cmpind mtsis, b.dr hnnioMl cl!]ssgrio pe€du6 *irh *cE3' val!6 

of 200246 s sll s poel &.hniq6 *cE adoFcd, Plml 6ljrdid €mplov'n sidplc ols' 

od ffiny dlveloD.d dtmic pecl brtniqG lbr cMM b.$d drrmic F cl btlysir 

fi. rcs4rchd u*d Fnst difr€E@ appMch .s w€U s svslen Iv appboch' I!' 

'nimotor 

findings wee 6busl and oonsisienl. lnstituridql qulilv is posnivelv s$rcirted with 

ocommic go*rh. Index oa imrirurionalizcd *iil tehnologies d'picls ! po3itive lnii 

3ignifi@nl ccfficicnt in go*th rcsr.sion. llow.v.t, who ill No din'Nions *t ltsted' 

n* tdeing lehslogirs main€d insisnif@l rhuglFur' This s4ge*s thlt A i R'nt 

sekinS inii$liffi do prode t cdiddblc inF€.t on dtmio FfomMc" *h'6 llE 

impsr ol risl Edrcing iditulios o gdMh 6 nd ve., sisni6@t Thk @ld b' dk lo 

Fiv.lc alGhltive ituiitutioml lm3€tud rhat wolld li,l in lhal gaP lsff in !b$n* of fomrl 

risk r€nuoing iNlitutionn thcFs no seh adngenenl dxisls for lnti_rcht sking 

&chnologi€s. How.ver, sunDary inder oNficicnl is oonsid€mblv highet the rd oth'r lwo 

3u88.sring risk rcducine rehnolosis mid ior pmducc rc$lt alo@, but do Dddocc lheir 

own inp*r whcn @mbincd *irh Anli Enl sli.g bhnologi6 H6.., this &bit'd ed 

mbst Mltsis suggsls th.r incn[ioN Ittodue a Posiliw.tr4t o greml ..d @Mc 

palom.@. Mmrcr, dEn enihtt! aE hrg. showins dd jlst linl. impbvins in 

insilutioul quliti.s would pod@ hugc jnp.ct ot lro*lh ood @ndnic p.rtbm!ic.. 

lllle, il suld onlidddy be suggFLd llEl innnuioMl reloms such 3s minimizing

@flion, srMgth.ni.g pbp€ny rishts, lnd imlovir8 h* od oder @nditions' cnforcing 

oonrEcls @n lod ro emmic gDMh. 

ChiDtcr 9 is devoted !o qploring inslitulion! sorah 

emlidcs in dcvelopi'g norions llse 

Mtio6 have ftei ow s€l oft@hlens and dvnrmics TheEIorc, lo 

'mpinctllv 

dl iBrirutios in ddeloping cMui.s, not onlv Sivcs 

tss$ lhc rol' 

this index t *idt oceDrtbilitv bul ale 

hel03 fomut.& policiB to ehi.rc $sl.idbL gosh 3irilr ro *htt d'vclop€d counlrics 

hrt. {hic*d. Sp€ifictllt, il aftcmp|d ro r5l lh. imFct of itdd of innndiMlizcd sitl 

Gh.oloei6 (cGs sridoD ed then sb indi@s pEsnLd in chaDt€r 7 _ m su3lliMblc 

c@nooic er*a]l of45 d€leloPing olnrrics A oomPEhensile nodel ofeondi' Sror(h 

*os dcvclop€d Rirh 6osl ol 6e Flev.nl ie$rs lhot inuNn@ glo*th in ddvelopins natons 

included in lhe model sF.ifically, n i.clud.s isloN dat onml foi initidl @nditions' public 

invc$mcnt ls infittutuE, eving3, m&@m@ic nlbilig, qLdtl debl humo 

d.velop6c.r indioto|s" c'jffi. @ut for cxt.n.l p.srids 'trd tborc lll $t ininuions 

Tle Bulls w@ quire sidilr b ffieh.r's dli.r duld Noftvd, in thir sudv' ns|{ 

dtucing 1dhnotogi6 do pnn@ o Dositirc dnd si8!i6dl impacr d gmwlll So' ils inFcl 

on goffh might b€ noE Fomdc€d for dcv.loping @nai.s. ovdll. thi! sludv sulgcsls o 

drong linl .mons inslilulioru! qualitv, msdconomic sltbililv ttd edooic pcrlom'nc'' 

md .l$ connos ondilioml @nvcrscnco as predicr.d bv modm lhon6 of goMh 'llis 

n.ds thrr if rn developing mtids imlovc th.n instituliml qutlilid, their chdes ot 

cdch-up ,odd gFrly irro- 

chlpt r lO F|ts r Fnjole r(ff m Pdilre rc mlc this $dv al$ cmFlibl. io sjtSlc 

dntry {tJ4rmtu. Single @ul't @ltsis cm idd funhcr diffiions to rte lihluE 6 lh'E 

bay b. difl@n@s in qDlity of dot! fim ounrry 16 ountrv maling ompeisn t bil 

dubious. Funh.more, c@nlry sF.ific liltysic cu lbm a I'ens enpiriql lound.tion lor 

mating counrry's poUcy. Above all, no sludy h.s b..n ddc ro cipluE insritution grow.h lint

for P.rhL{. This cl'prer pDyid.s ueful inlomalion iD andlvzits institutions 36$1h 

dynrmic lor dcveloping countri€s, ltd prosenc sn index of ineitDrion i4d socjtl 

ior llkirlan To Ddurc th* dihetuionE 12 

tdhnologid !s qell d its hro sub 

'ndiocs 

v.ri!bl6 h.v. b€€n aggcgllei using Prircip.l componal @llsis @veing Fnod ftom 1984 

ro 2006. ls frpiriEl mlysis, OU B r.ll s CMM ndh.dolog/ @nlrol fq bia {us'd by 

.ndosrus vsitblei is employ.d Th. @16 @fmed p€viM mlvsk Pblishn 

'nd'r 

of itrnnudotli2td shl re.hmloBi.i havc . signifiMr (losiliw) innuq@ d 8rcw1h' Th' 

sinild esull witn6*d in m. ol ils sub indcx Melv n* Edlcins lshnologid Hor'ftr' 

and'rc sling l4hnologies Ehainen insigniticrnl, Tbis in oont"sl lo pEvioB rcsulls 

sulgcsb irEtred imponon@ and 16l rcduoinS lelhnolo8ies in econmic dvnanica or 

Palisls. Ovo all, inslitolions Fd6o€ 

gru$h it lons on for Patisld ThcEfoc, fo' a 

policy implic.tid, su6 ord, policy could b. inn@nc.d bv rhe $undms ol iturirdims 

Chlpr.r ll in6tiSrt6 susal Elllio$hip bdwen i.citutid6l qulitv td @tmic 

p.rflfuc in Pltislzn 6ing rh. Jofide-JKlis ointenrid @hniqw dd rhc cmng'r 

cluelity tcsl. TIE sludy Esultt indid. dtt ldnudons ed gn*d e @inGBEkd lid lhls 

cxiibir a Elilble longm Eldionship. TIE Cnnrercluslitv l€sr fi.di4s indio& thar thcd 

h clclr lone dn auslity bctween lnstitdons md 8m"1h there institutional qualitv ooues 

sonomic 8ro*lh. 

ltowever, no ousl .videe was aoutd aor shon iun in dv dierio' 

Tfidfoc, 6 a policy inpli@ri@ dBr ininudondl qulitv n.v sue ro th' 3usjntblc 

irctEe in @ntry's in€me in lhe ldg tu.. 

'Io shluiz, rhis rh6is n:ade o ![.m'| b fitrj tlE imFcl oa idioriml qulilv d 

s61lidblo ..{mic erc*d !m @Drtid Ar ovcdtl i.slidliqEl Iles is e$blisltd 

bard d rhe ol'lml ntugh *hich n inpdcts gpqrh. Th* ch$D.ls ft l) lhmu8rt Eductne 

rhc risk ol doine b6ins od 2) lhMsi p@ting diveaion ol |sUB jisn pr.drcrirc 

lcliviries b Ent sking, OveBll indq 6 wll rs $ee chdnels is lhd ehpiiqlly lened

R.$lB e dviftinr, inlitutioNl h&x pod@ hIgc ild si8nif@i imp.4i o so{lh in loog 

M, Meovd, Anti Mt satins chsi.l .l$ Fb6 t b. sirnifdt Whi.h i@5 snd 

ii.siMioB s o@nl diwEbo of @16 !o p'!d.!otv E s6*ing..riviti. rtd *ill in lun 

iDDtls imyttid.nd prcdsriviry lio!.q. rftl tldsin! ch.r*lddrl *N @ p'!dx€ 

. tsnifpn imF.i in tu cNry F$eric In m|l'lq n* EdEitg cr[Md gn3 io b' 

w*j.8 rcll lo Plrin a .!i Fl $ddig ii&x Fov.d 

ro b. icirnifisl Thi. 5u18615 dtc 

nisl dfrdt inFcl of tlt$ ch.mk b.td d @nlrt 9ai6c drMic hr @dll imPr of 

'Itl cnr stirs reh,sLgis G Ie F.@B.d Slobllv 

nEdoc, in d.Jg'iig rl i,nPtdlrlg 6.|mt Fliis htiiniNl 6fm3 shdld b' 

midqld . r.p Fidi, in odc io di.w *rrinblhv h @Mh gord In @ fd 

&vdQinS M!i!g de b m *l|ge oa rBdititd dvqlFr. hd n i @ditidrl 

ueo. dE r& ofttF Fhbn i'dn'ridrt s val indiori.D o b. rftihd.d lo dEn bd( o'

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WiltLleoliE lt .'r|.&!.ldtnar&Arbit.dadtdhtdd'ia' 

Will@ Oltrr. 196J.'Ii. F-rint IdicofodL&n'NdYalr FE ha 

Vd6f-&.aD3.'Cld.lmlcF!.P.dtrdtn'ddLti4odi*' W-n||ra' 

wald B.d! dd.l D.$Ltd Fb ({br ldt} 

vald 8..1, wdld Dd.lo?oor le6, (EtoG r.-t' 

rlrdldB.!L.Bd.r!.j$Su{tv. ti$r/srwtd.!.isvlyad9' 

c/dlrd-Ei(odftra'Dr,tre.'x/6ldBd'llclctdfllFhE 

co.Fdo.d Prkte Mtdnb 

vcldB.mbra@tlbB.dlis'Glo!.Icdf'dlivsrtPott'o&t4tt/z.id!sAln 

.,a!5.1r-i!l5b-.-""v:tdB|iidKdnffi

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Pryr 3190, NATTON^L BURnAU 

OT ECONOMIC REIIEARCH 

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e

Appendix Cr Details ofvafiables used in index on Pakistanll 

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't:*o|q|!gj|ylg3:rdplii.|oppo6ition. 

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' 

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'*or.Fe.qJGb!q

VTTA 

Pnkm Di Prn.dr o*rb k- sMrqui 

'',J|'3ibr''rxhydr.x|!|.li&?'DHA'|o'd| 

FnId ol ltro.st: E@nB ond Ft@z 

g!C!@ W ,106 cra ldird. us^ (i.sid*d s Ld.l? dtdid.t) 

t0.lt tiFdr o.€ctuiq uni6ity orxltii 

Ldu., Didbtoy lNritot of trd' Ddudbn (DrrrE) 

v6s rrrry, (46 Lhit!6ir, sshs s'lrd tKUBs) 

ftFhdorfui*|lryftMs 

De&.. rmigi &.he D6r (c4d& r tddtud) 

l]fufiicB|diisogdni4^dfu 

.fu1M'qfr4M4@d!i!@

(rirh Ma!.n A. au lr0 lriibd0idird scirTdimlqi4r*i A abb.l P.wt!.. MPRA PwNo 

196'Uiicil'rib.!ofMuid!cqm' 

(wih hsd ^. ad!2or0. triedoB ud r.M- Gm{i ^ Ga dd4 [vid.E. MPRA P@ No. 1t47. 

lni*slr Llbtry ofMnii.l! camey. 

(wi6 rlsd ^. adl2lro D6 tdto 

(wirh M$ood A a'D, t0r0 ixcM$l imic Gre"1h' AD 0nFndl 

rivdiadm ror Pdib EEon, wR]|AFNo 19745, Utriuiry uh.tyofMtri.n cddrr' 

(w Meod A. ad), ?0ro Itu crr! b o'M: ar hrili..r 

lDdiljidlffhrib€@oo,.Mn^P+lNol9.5,ljiitdi'yLih'ydMbld!amty' 

!0{d chh.ltiin î ^rdodE vi.r t vdl 1t(!) p| 

($irh arm.d t[ Mo\liil M. "rh. oul klaioNhlp h.N6 td49 Did h@ 

Fi,i,ia'h}dilriFfqPfuEotr 

(^dtd !irl' Fop'x.d Erniom) 

'9it, (Dcnb) 

(vi , Mrsd A qrr) rdion@odb hcd on Dnmt tucr 

Esiniion (U@brirH tuho 

(wir,, rllsd A. aiD bidMldd|tn sdlrl rc|lmbgid d Bdmi. arMrr ^ 

Pdr cciksdioi Mlt'is 

'a Elill of lradiv. rmiruru rysn. rnd i! inP.r on n*y rruddis-, (Lrtrllhlid'ar M@Fpn) 

i kvt' coirdd! (sERc 20m) 

^rsd 1007 

sr{rldd t Eq ruic co !l4 o@td bt siis.tq! Famni. Rdi.w m orr. rqi@rd i 

b'Noi.lL.u@hrJE'hs'iglld 

. p{d xa@ tu 11. Tllid rlffii I rd Edonid ( rcBME 

md sDdhii4d wo'klrcl4 (Jtiurv 2007). (r&r'l

Fconomlc Growth TbdolEd

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