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The Role of Institutions

What are institutions not always measurable how o you

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Unformatted text preview: performance: The protection against risk of expropriation vs. log GDP per capita, PPP shows a positive trend In control of corruption, same trend BUT: correlation is not causation: Political institutions and process " ! economic structures and processes or is there something external affecting each one individually (geography, culture) Three methodological problems: Measurement issues: What is culture? What are institutions? Not always measurable How o you deal with the fact that these variables change constantly Omitted variables History Human behavior Identification: You don’t know what is causing what How do you know x is causing y? Need to find countries that area s similar as possible in all ways OTHER than one variable to see the differential effect of that variable Exogenous shocks: Let’s exploit “natural experiments” of history, where some societies...
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