The paper demonstrates how trade between developing countries can cause the divergence of long-run growth among these countries. The model describes two symmetric countries trading with each other and the industrial rest of the world. Bilateral trade occurs at any moment if the countries have...

Using World Bank data on institutional quality and the KOF Globalization Index, we examine over 100 countries from 1992 to 2010 to analyze the relationship between economic and social globalization and six measures of institutional quality. Theoretically, the incentives of elites to respond to...

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In this paper, I explore the politically contested association between the degree of capitalism, captured by measures of economic freedom, and the risk and characteristics of economic crisis. After offering some brief theoretical considerations, I estimate the effects of economic freedom on...

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This paper considers a small open economy where an input-output industrial structure, scale economies and imperfect competition, create vertical linkages and multiple equilibria. In this environment, an imperfect labor market is introduced by assuming unionized labor. It is shown that if the...

This paper considers a small open economy with an input-output industrial structure that creates vertical linkages and multiple equilibria. An imperfect labor market is introduced by assuming unionized labor. It is shown that a deregulation of the labor market may trigger a large discontinuous...

This paper presents a survey of the literature on property rights and economic growth. It discusses different theoretical mechanisms that relate property rights to economic development. Lack of protection of property rights can result in slow economic growth through different channels:...

While the importance of institutions for explaining cross-country income differences is widely recognized, comparatively little is known about the origins of economic institutions. One strand of the literature emphasizes cultural differences while another points at exogenous environmental...

We analyze motivations for, and possible alternatives to, the Stability and Growth Pact (SGP). With regard to the former, we identify domestic policy failures and various cross-country spillover effects; with regard to the latter, we contrast an "economic-theory" perspective on optimal...