The paper is a critical review of recent literature on institutions and development, from the perspective of whether the research findings offer useful recipes for development policy. It concludes by suggesting a Bayesian framework for diagnosing causes of low growth.
This article offers a provocative critique of the ability of research on the impact of institutions on growth to offer immediate and practical recommendations for reforming and redesigning institutions in developing countries and transition economies. The literature traces the sources of growth to unalterable historical and geographic features. It contains equally plausible recommendations for opposite courses of action. It is sometimes driven by fads or recommends imitation of the latest success story. Some recommendations are too vague or too general to constitute practical advice. The article suggests a Bayesian diagnostic procedure to identify the causes of economic failure in an individual country as a first step toward remedying the failure. Copyright The Author 2007. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail: firstname.lastname@example.org, Oxford University Press.
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