Institutions, Economic Performance and the Visible Hand
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Institutions, Economic Performance and the Visible Hand

Theory and Evidence

Ashok Chakravarti

The book challenges the conventional wisdom on the determinants of economic performance and provides an alternative vision of the functioning of an economic system. The author provides a structured survey which critically evaluates the theory and evidence of neoclassical approaches to growth and development. He then skillfully integrates insights from the old and new institutional economics into an original and comprehensive vision of the relationship between institutions, growth and economic development.
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Chapter 8: Southern Sudan: A Case Study in Discontinuous Institutional Change

Ashok Chakravarti


1 In the preceding chapters we reviewed: the empirical and historical evidence on the factors underlying modern economic growth in the West; the more recent good economic performance in certain developing countries; and some of the favourable institutional transitions that have occurred in the non-western world. The empirical evidence considered in Chapter 5 showed that institutions are the deep determinants of growth and development. The vast majority of econometric studies reviewed also show that variables of economic and political governance, such as the security of property rights, the rule of law, the quality of the bureaucracy, and the absence of corruption, which reflect the nature of institutions in a society, explain most of the observed cross-country differences in the growth of per capita income in the developing world. The historical evidence considered in Chapter 6 illustrated that the necessary favourable political and economic frameworks in Europe emerged through a gradual evolutionary process that took several hundred years and was the consequence of an interaction and clash between forces largely endogenous to those societies. In the eastern medieval civilizations, on the other hand, no such institutional change occurred. The economic and political systems continued to be dominated by predatory feudal despotisms. Consequently, there were no constraints on arbitrary power, which as we saw in Chapter 6, is a fundamental pre-requisite for the development of a modern state and the protection of property and contractual rights. In recent times, however, some favourable institutional transitions have occurred in the nonwestern world. The evidence...

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