We present accepted basic arguments on the role of institutions in development and then discuss the corresponding empirical evidence in support (or not) of those arguments. Methodologically, our emphasis is on experimental evidence wherever available, and thematically we focus on political and legal institutions. In the political sphere, we distinguish between rules shaping representation and accountability, and state capacity. In the legal sphere we distinguish between the profile of legally sanctioned rights (such as property rights and the role of informality) and the workings of the judiciary and the quality of enforcement. We distil the lessons learned from the literature and present open questions in each topic, thus highlighting promising avenues for future empirical research.
Authors: Ernesto dal Bo and Fred Finan