Is institutional improvement possible?

ABSTRACT

A substantial literature shows that economic prosperity is dependent on the quality of economic institutions. Countries with low-quality institutions remain poor while countries with high-quality institutions prosper. Improvement in institutional quality brings with it economic growth. Poor countries must improve their economic institutions to escape poverty; so, if a poor country’s institutional structure is unlikely to improve, that suggests dismal prospects for economic growth and an escape from poverty. An examination of institutional quality over 30 years indicates that countries with low-quality institutions have improved their institutional quality, which demonstrates that poor countries are not stuck with low-quality institutions. They can improve their institutions, and consequently, can generate economic growth and escape poverty.

KEYWORDS:

• Institutions
• economic freedom
• institutional improvement
• convergence

JEL CLASSIFICATION:

• O17
• O43
• P10

Disclosure statement

No potential conflict of interest was reported by the authors.