Institutions and economic development: Taking stock and looking forward

This paper serves as a companion paper to the Economic Development and Institutions’ (EDI) White Paper “At the Intersection: A Review of Institutions in Economic Development” (Dal Bó and Finan, 2016). The White Paper reviewed nearly 200 publications from economics and political science on the role of institutions in development, drawing from experimental and quasi-experimental evidence whenever possible. The goal of the White Paper was threefold: (i) to present a framework for reviewing and synthesizing the existing evidence on how legal and political institutions affect development outcomes; (ii) to distill lessons learned from the literature; and (iii) to present open questions in each topic that defined the research frontier at that time. This Green Paper revisits the themes and research priorities identified by the White Paper five years later. The purpose is to assess how the research funded by the EDI program contributes to our knowledge of how institutions affect development, and where the research frontier lies today. Whenever possible, we synthesize lessons across funded studies in cross-cutting analytic themes to identify the mechanisms that underlie observed effects. This paper illustrates the substantial progress we have made in our understanding of the role of institutions in development and growth. While this new evidence sheds light on many of the open questions originally raised in the White Paper, often it also raises new questions and pushes the research frontier forward. It is clear that this is an active area of research where our knowledge should, and hopefully will, continue to evolve over time