Abstract

This dissertation analyzes the importance of institutions for economic performance. The first two chapters assess the importance of institutions empirically, while the last one provides a dynamic model of institutional change. Chapter 1 analyzes the robustness of institutions in growth regressions by means of the Bayesian Model Averaging methodology to find that institutions and public health are important and robust determimants of economic growth. Chapter 2 assesses the importance of institutional variables for determining income per capita in OECD countries by means of introducing new instrumental variables. Given the paramount role of institutions for economic development established in the first two chapters and, more importantly, in prominent recent contributions to the literature, the last chapter tries to answers the question why countries trying to improve their institutional framework may fail.