Institutions and Economic Development. New tests and new doubts.

Is institutional quality a major driver of economic development? This paper tackles the question by focusing on the within-country variation of growth rates of GDP per capita. While previous attempts using this methodology have controlled for many of the standard de- terminants of the empirical growth literature, we argue that such ap- proach is not adequate if good institutions are the main reason behind decisions to invest in human or physical capital accumulation or to engage in international trade. Our regressions exclude the proximate causes of growth in order to estimate the overall e¤ect of institutional quality. Perhaps surprisingly, we nd no support for the thesis that institutional quality improves economic growth. These results encourage a reconsideration of the evidence provided elsewhere in the literature.

Meeting technologies and optimal trading mechanisms in competitive search markets

In a market in which sellers compete by posting mechanisms, we study how the properties of the meeting technology affect the mechanism that sellers select. In general, sellers have incentive to use mechanisms that are socially efficient. In our environment, sellers achieve this by posting an auction with a reserve price equal to their own valuation, along with a transfer that is paid by (or to) all buyers with whom the seller meets. However, we define a novel condition on meeting technologies, which we call “invariance,” and show that the transfer is equal to zero if and only if the meeting technology satisfies this condition.