Institutions, human capital and economic growth

Economists and social scientists have long debated the relative importance of institutions and human capital as fundamental determinants of long-run development. After discussing some of the limitations of the existing literature, we use panel data covering the period 1955-2010 and a novel indicator of property rights protection from Varieties of Democracy (V-Dem) to reinvestigate these relationships. We find that both property rights institutions and human capital are positively related to economic growth, although human capital is relatively more robust when we account for country fixed effects. We also investigate whether the growth effects of property rights institutions are heterogeneous across different levels of development. In contrast to the cross-country evidence, our panel data results suggest that broad-based property rights protection clearly and strongly enhances growth only in advanced economies.