The Role of Institutions in Economic Growth: A Critical Evaluation

Abstract

Empirical research at both the macro and micro levels has shown that institutions significantly impact a country’s economy (Acemoglu et al., 2001). Strong institutions are essential for a nation’s long-term and positive growth. In an era where sustainability issues are critical to avoiding global catastrophe, economic progress must continue without depleting the planet’s resources, as this could lead to tragedy in our pursuit of more wealth. A broad range of norms and civic values, effective law enforcement, and robust protection of property rights are all critical components that improve economic performance over time. This analysis confirms that institutional qualities have a strong relationship with economic growth. The paper “The Role of Institutions in Economic Growth: A Critical Evaluation” explores how institutions encourage economic growth by determining the extent of appropriable investment returns, the level of oppression and appropriation, and the overall climate for collaboration and social improvement.