<p>One argument brought forward (it is a generalization/argument for lack of infrastructures) is the Acemoglu-Robinson hypothesis of extractive versus inclusive institutions.</p>

<p>Long-story short: some institutions are good for (long term) growth ("inclusive"), and some are good for short-term extraction of resources ("extractive"). Depending on whether the elites / rulers of a country (colony) had long-term plans of "staying in a country" or whether they wanted to just "quickly get everything they can" out of the country, they installed these different type of institutions.</p>

<p>See also their <a href="http://economics.mit.edu/files/7850" rel="noreferrer">slides</a> and <a href="http://rads.stackoverflow.com/amzn/click/B0058Z4NR8" rel="noreferrer">book</a>.</p>

CC BY-SA 3.0
2015-04-28T11:35:19.497Z
2015-04-28T11:35:19.497Z
FooBar
<p>While a lack of infrastructure and public goods may explain poverty in a short-term perspective, it is widely considered that institutions are the key factor in the long term (how could infrastructure and public goods be provided without suitable institutions?).</p>

<p>As well as Acemoglu &amp; Robinson, referred to in FooBar's answer, two important writers on this topic are <a href="http://en.wikipedia.org/wiki/Hernando_de_Soto_Polar" rel="nofollow">Hernando de Soto</a> and <a href="http://en.wikipedia.org/wiki/Douglass_North" rel="nofollow">Douglass North</a>.</p>

<p>De Soto's book <a href="http://rads.stackoverflow.com/amzn/click/0465016154" rel="nofollow">The Mystery of Capital</a> argues that people in poor countries are often constrained by the absence of institutions providing effective property rights over capital.  Thus the land farmed by a villager may be informally recognised by other villagers as being his land, but his lack of formal property rights over the land means that he cannot use it as security for a loan to buy farm equipment, and cannot sell it if he wants to start a different business or move to a city.  As a result his economic options are heavily constrained.</p>

<p>North, in his paper <a href="http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.5.1.97" rel="nofollow">Institutions</a>, emphasizes the importance for economic development of institutions which:</p>

<ol>
<li>facilitate trade and specialisation, both within countries and
internationally, by lowering transactions costs between people in
circumstances where the informal constraints of village life do not
apply;</li>
<li>facilitate mobility of capital, by developing a legal framework for 
financial instruments and removing legal obstacles (eg usury laws);</li>
<li>facilitate the spreading of risk, reducing the consequences of bad
luck for individuals and firms.</li>
</ol>

<p>While such institutions are largely taken for granted in developed countries, North suggests that their growth is not an inevitable development, and indeed that the historical norm is the absence of such a development (p 98 of Institutions).</p>

CC BY-SA 3.0
2015-04-30T12:31:34.500Z
2015-04-30T12:31:34.500Z
Adam Bailey
<p>Twin-peak of economic growth is one of the concepts discussed in economics. Most of explanations for poverty traps are baseed on the lack of infrastructures and public goods.
How could be another main reasons to explain this important issue ? </p>

<p>Any academic reference is appreciated.</p>

CC BY-SA 3.0
2015-04-28T11:26:41.130Z
the ultimate question, isn't it?
han-tyumi
CC BY-SA 3.0
2015-04-28T13:27:20.953Z
Originally, it was because some regions have more natural resources than others. Nowadays it's not that simple anymore. The actual question would be: "Why does the prosperity of countries not correlate with their natural resources anymore?"
Bregalad
CC BY-SA 3.0
2015-05-03T14:11:20.330Z
I think you don't really know the logic of this site. The question is to have some academic references about the subject not to have an "exact" answer.
optimal control
<macroeconomics><economic-growth><development><poverty><institutions>
Why some countries are wealthier than others?
optimal control
# Why some countries are wealthier than others?

(Asked by: username_0 on 2015-04-28)

Twin-peak of economic growth is one of the concepts discussed in economics. Most of explanations for poverty traps are baseed on the lack of infrastructures and public goods.
How could be another main reasons to explain this important issue ?

Any academic reference is appreciated.

**Tags:** macroeconomics, economic-growth, development, poverty, institutions

> **Comments:**
> **username_1**: the ultimate question, isn't it?  
> **username_2**: Originally, it was because some regions have more natural resources than others. Nowadays it's not that simple anymore. The actual question would be: "Why does the prosperity of countries not correlate with their natural resources anymore?"  
> **username_0**: I think you don't really know the logic of this site. The question is to have some academic references about the subject not to have an "exact" answer.  

---

## 2 answers

### Answer by username_4 on 2015-04-30. Score: 3 | Accepted answer

While a lack of infrastructure and public goods may explain poverty in a short-term perspective, it is widely considered that institutions are the key factor in the long term (how could infrastructure and public goods be provided without suitable institutions?).

As well as Acemoglu & Robinson, referred to in username_3's answer, two important writers on this topic are [Hernando de Soto](http://en.wikipedia.org/wiki/Hernando_de_Soto_Polar) and [Douglass North](http://en.wikipedia.org/wiki/Douglass_North).

De Soto's book [The Mystery of Capital](http://rads.stackoverflow.com/amzn/click/0465016154) argues that people in poor countries are often constrained by the absence of institutions providing effective property rights over capital. Thus the land farmed by a villager may be informally recognised by other villagers as being his land, but his lack of formal property rights over the land means that he cannot use it as security for a loan to buy farm equipment, and cannot sell it if he wants to start a different business or move to a city. As a result his economic options are heavily constrained.

North, in his paper [Institutions](http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.5.1.97), emphasizes the importance for economic development of institutions which:

1. facilitate trade and specialisation, both within countries and
   internationally, by lowering transactions costs between people in
   circumstances where the informal constraints of village life do not
   apply;
2. facilitate mobility of capital, by developing a legal framework for
   financial instruments and removing legal obstacles (eg usury laws);
3. facilitate the spreading of risk, reducing the consequences of bad
   luck for individuals and firms.

While such institutions are largely taken for granted in developed countries, North suggests that their growth is not an inevitable development, and indeed that the historical norm is the absence of such a development (p 98 of Institutions).


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### Answer by username_3 on 2015-04-28. Score: 8

One argument brought forward (it is a generalization/argument for lack of infrastructures) is the Acemoglu-Robinson hypothesis of extractive versus inclusive institutions.

Long-story short: some institutions are good for (long term) growth ("inclusive"), and some are good for short-term extraction of resources ("extractive"). Depending on whether the elites / rulers of a country (colony) had long-term plans of "staying in a country" or whether they wanted to just "quickly get everything they can" out of the country, they installed these different type of institutions.

See also their [slides](http://economics.mit.edu/files/7850) and [book](http://rads.stackoverflow.com/amzn/click/B0058Z4NR8).


---

