Institutions and National Development: A Comparative Study

Abstract

We review the theoretical and empirical literature leading to the “institutional turn” in the economics of development. Sociologists have welcomed this turn as a vindication of their own ideas, but have overlooked two major shortcomings in the economics literature: First, a failure to define “institutions” rigorously and to distinguish them from the real-life organizations that they govern; second, a tendency to use nations as units of analysis in cross-national studies, neglecting intra-national differences. We tackle these limitations through a comparative study of institutions in Latin America and Southern Europe. In total, twenty-nine existing institutions were subjected to year-long study in six countries. Using Qualitative Comparative Analysis (QCA), we examine the combination of causes leading to institutionally adequate and developmentally effective organizations. Differences across countries and among institutions are highlighted and discussed. Implications of the complex causal set leading to effective developmental institutions, as identified by QCA methodology, are examined.