We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Institutions and Growth: A Macroeconomic Framework.
- Authors
Villanueva, Delano S.
- Abstract
This paper is an attempt to meet North's (1990) challenge to macroeconomists, and to incorporate Acemoglu et al.'s (2005, 2012) argument about the overarching role of political and economic institutions in long-run economic performance. This is done through a formal growth model in which goods and services produced by institutions are inputs to an endogenous capital and technology (or productivity) sector, which is the main driver for robust and steady long-run economic growth. Countries with institutions that protect property and contract rights and the rule of law, promote fiscal, monetary, and financial stability, sustain efficient financial intermediation, build and maintain public infrastructure, support education, training and digital technology, and are allocated sufficient resources for their enlargement and improvement in order to reduce production and transaction costs in the productivity sector, are likely to experience high and sustained rates of economic growth in the long term. The efficiency with which such institutions contribute to robust, long-term economic performance is measured by their marginal, externality impact on the productivity sector. In the case of less developed or poor countries, these externalities are either negligible or even negative. For developed countries, they are large and positive. For countries in transition, they start from small positive magnitudes and increasingly become large in their journey to developed or advanced status. Such key externalities are correlated with the six regularly published World Bank's Worldwide Governance Indicators (WGI). The effectiveness of growth policies and the speed of adjustment to long-term growth are determined by individual country values of the six WGI. Improvements of these WGIs are results of political decisions made by government officials and the body politic in a democratic society. Following analysis and discussion of the growth model, the paper concludes with several implications for a long-term growth strategy focused on improvements in the WGI and increased investments in the institutional and productivity sectors.
- Subjects
WORLD Bank; ENDOGENOUS growth (Economics); ECONOMIC indicators; DECISION making in political science; INTERMEDIATION (Finance); INSTITUTIONAL investments; TRANSACTION costs
- Publication
DLSU Business & Economics Review, 2022, Vol 32, Issue 1, p1
- ISSN
0116-7111
- Publication type
Article