Institutional Transformations, Polity and Economic Outcomes

Download or read book Institutional Transformations, Polity and Economic Outcomes written by Sophia Gollwitzer and published by International Monetary Fund. This book was released on 2012-03-01 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests the theoretical framework developed by North, Wallis and Weingast (2009) on the transition from closed to open access societies. They posit that societies need to go through three doorsteps: (i) the establishment of rule of law among elites; (ii) the adoption of perpetually existing organizations; and (iii) the political control of the military. We identify indicators reflecting these doorsteps and graphically test the correlation between them and a set of political and economic variables. Finally, through Identification through Heteroskedasticity we test these relationships econometrically. The paper broadly confirms the logic behind the doorsteps as necessary steps in the transition to open access societies. The doorsteps influence economic and political processes, as well as each other, with varying intensity. We also identify income inequality as a potentially important force leading to social change.