Appropriate Institutions and Economic Growth - one size fits no-one

Modern-day economics is increasingly biased towards believing that institutions matter for growth, an argument that has been further enforced by the recent economic crisis. There is also a wide consensus on what these growth-promoting institutions should look like, and countries are periodically ranked depending on how their institutional structure compares with the best-practice institutions, mostly in place in the developing world. In this paper, it is argued that ”non-desirable” or “second-best” institutions can be beneficial for fostering investment and thus providing a starting point for sustained growth, and that what matters is the appropriateness of institutions to the economy’s distance to the frontier or current phase of development. Anecdotal evidence from Japan and South-Korea is used as a motivation for studying the subject and a model is presented to describe this phenomenon. In the model, the rigidity or non-rigidity of the institutions is described by entrepreneurial selection. It is assumed that entrepreneurs are the ones taking part in the imitation and innovation of technologies, and that decisions on whether or not their projects are refinanced comes from capitalists. The capitalists in turn have no entrepreneurial skills and act merely as financers of projects. The model has two periods, and two kinds of entrepreneurs: those with high skills and those with low skills. The society’s choice of whether an imitation or innovation – based strategy is chosen is modeled as the trade-off between refinancing a low-skill entrepreneur or investing in the selection of the entrepreneurs resulting in a larger fraction of high-skill entrepreneurs with the ability to innovate but less total investment. Finally, a real-world example from India is presented as an initial attempt to test the theory. The data from the example is not included in this paper. It is noted that the model may be lacking explanatory power due to difficulties in testing the predictions, but that this should not be seen as a reason to disregard the theory – the solution might lie in developing better tools, not better just better theories. The conclusion presented is that institutions do matter. There is no one-size-fits-all-solution when it comes to institutional arrangements in different countries, and developing countries should be given space to develop their own institutional structures that cater to their specific needs.

European aspen and hybrid aspen under changing environment : Leaf traits, growth and litter decomposition

Understanding the responses of species and ecosystems to human-induced global environmental change has become a high research priority. The main aim of this thesis was to investigate how certain environmental factors that relate to global change affect European aspen (Populus tremula), a keystone species in boreal forests, and hybrid aspen (P. tremula × P. tremuloides), cultivated in commercial plantations. The main points under consideration were the acclimatization potential of aspen through changes in leaf morphology, as well as effects on growth, leaf litter chemistry and decomposition. The thesis is based on two experiments, in which young aspen (< 1 year) were exposed either to an atmospheric pollutant [elevated ozone (O3)] or variable resource availability [water, nitrogen (N)]; and two field studies, in which mature trees (> 8 years) were growing in environments exposed to multiple environmental stress factors (roadside and urban environments). The field studies included litter decomposition experiments. The results show that young aspen, especially the native European aspen, was sensitive to O3 in terms of visible leaf injuries. Elevated O3 resulted in reduced biomass allocation to roots and accelerated leaf senescence, suggesting negative effects on growth in the long term. Water and N availability modified the frost hardening of young aspen: High N supply, especially when combined with drought, postponed the development of frost hardiness, which in turn may predispose trees to early autumn frosts. This effect was more pronounced in European aspen. The field studies showed that mature aspen acclimatized to roadside and urban environments by producing more xeromorphic leaves. Leaf morphology was also observed to vary in response to interannual climatic variation, which further indicates the ability of aspen for phenotypic plasticity. Intraspecific variation was found in several of the traits measured, although intraspecific differences in response to the abiotic factors examined were generally small throughout the studies. However, some differences between clones were found in sensitivity to O3 and the roadside environment. Aspen leaf litter decomposition was retarded in the roadside environment, but only initially. By contrast, decomposition was found to be faster in the urban than the rural environment throughout the study. The higher quality of urban litter (higher in N, lower in lignin and phenolics), as well as higher temperature, N deposition and humus pH at the urban site were factors likely to promote decay. The phenotypic plasticity combined with intraspecific variation found in the studies imply that aspen has potential for withstanding environmental changes, although some global change factors, such as rising O3 levels, may adversely affect its performance. The results also suggest that the multiple environmental changes taking place in urban areas which correspond closely with the main drivers of global change can modify ecosystem functioning by promoting litter decomposition, mediated partly by alterations in leaf litter quality.