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Lecture 6: Institutions and Economic Growth
Terms in this set (16)
- Structure incentives in humane exchange, whether political, social, or economic
The formal and informal rules that constrain human economic behavior
- Can create and destroy incentives for individuals to engage in trade, invest in human/ physical capital, engage in R&D, and work effort
- protection for private property rights
- predictable enforcement of contracts
- existing legal framework that provide opportunities to invest and retain control of ones money
Economic Insitutions Definition
Determined as collective choices of different groups of society to fulfill their own economic interest
How are economic institutions determined if there is conflict of interest between different groups?
Determines how power is obtained and exercised
Examples of Political Institutions
1. Government Effectiveness
3. Rule of Law
Captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies.
Dishonest or fraudulent conduct by those in power, typically involving bribery.
Rule of Law
Principle that the law applies to everyone, even those who govern
T/F As the rule of law increases, GDP increases
T/F As corruption decreases, GDP increases
Why did the Europeans chose to settle in Australia and the US and not Congo?
European settlement in the colonies depended on how hospitable the colonized countries were for settlement in terms of harsh weather and disease burden
Institutions where a plurality of groups are included in the process of governing and the economy. Promotes freedom and the ability to get rich by trade.
Institutions where a small group of individuals use the system to exploit the rest of the population
How can institutions change?
Requires a large change in the distribution of political power such as the transition from dictatorship to democracy.
The Korean Experiment
- The spilt of North and South Korea 1948
- North followed a Soviet Socialism and the South maintained a system of private property
- At the time of separation they bth had the same income per capita
- By 2000 the level of income in South Korea was more than 16,000 while the North was only 1,000
THIS SET IS OFTEN IN FOLDERS WITH...
Econ Lecture 1,2,3,4
Lecture 5: Geography and Economic Growth
Lecture 7: World Trade an Overview
Lecture 8: Ricardian Model of Comparative Advantage
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