Econometrics Institutions and Growth Essay Example | Topics and Well Written Essays - 2750 words

Econometrics Institutions and Growth - Essay Example This paper focuses on the reasons why some countries are wealthier than others, studies such as Daron Acemoglu (2001) focus on colonisation and its effect on institutions. They state that colonisation led to the introduction of institutions which are present today, these institutions are therefore contributed to better economic performance. The role of better institutions in economic performance is supported by North (1973) who states that better institutions would lead to more investment in human capital and this would result into better economic performance will be realised. Besley (1995) studied the relationship between property rights and output and identified that there was strong correlation between the two variables, therefore economic performance will also depends on property rights. In this paper we focus on the role of colonisation and establishment of institutions, we also discuss the effect of property right on GDP and the differences in economic performance and the colonisers of the various countries. A study by Acemoglu (2001) was based on three assumpti... lonisers are present today, these institutions have an effect on income per capita and that colonisers chose areas with low mortality and in areas with high mortality establish extractive institutions. According to the study by Acemoglu (2001) the high mortality rate was as a result of disease such as yellow fever and malaria which was common in the tropic areas, settlers had no immune to these diseases and therefore chose not settle in these areas, settlers settled in the equatorial regions where mortality was relatively low. Therefore we focus on the effect of good institutions and property rights to discuss the differences in the economic performance, according to Douglas North (1973) better institutions and secure poverty rights would lead to more investment in human capital will lead to better economic performance. Besley (1995) also stated that economic performance depends on property rights. It is also evident that the countries considered in previous studies were colonised by a number of countries, a study by Mathew Lange (2006) showed that colonisers had differing effect on post colonial period economic development, his study compared Spain and British colonies that showed that Spain colonies had negative effects on post colonial economic development while British colonies had positive effects on post colonial economic development, some explanation or this effect is associated with the type of institutions left by the colonisers, Landes(1998) stated that a comparison of Spain and British colonies is that British left better institutions. Methodology: The first section of the paper is a description of the sample, the determination the correlation between the various variables under question to determine the nature relationship, measure of central tendencies