This Paper analyses to which extent domestic institutions affect trade flows. We use two complementary approaches, one focusing on the size of total trade flows and one focusing on bilateral trade patterns (gravity equation). We also control for two other domestic policy variables: trade policy...

Weak public institutions, including high levels of corruption, characterize many developing countries. With a simple model, we demonstrate that institutional quality has important implications for the design of monetary policies and can produce several departures from the conventional wisdom. We...

This paper presents theory and evidence on the determinants of the size of the informal sector. We propose a simple theoretical model in which it is positively related to income inequality, more so under weak institutions, and is negatively related to the economy's wealth. These predictions are...

This paper's point of departure is that low-quality institutions, concentration of political power, and underdevelopment are persistent over time. Its analytical model views an equal distribution of political power as a commitment device to enhance institutional quality thereby promoting growth....

We explore how fiscal consolidations affect private sector confidence, a possible channel for the fiscal transmission that has received particular attention recently as a result of governments embarking on austerity trajectories in the aftermath of the crisis. Panel regressions based on the...

In this paper, we study the causal effect of income growth on institutional quality in the 1984-2007 cross country panel. To focus on exogenous income windfalls, we employ international oil price shocks as an instrument for income growth. While national incomes and measures of institutional...

We estimate the effect of international trade on average labour productivity across countries. Our empirical approach relies on a summary measure of trade that, we argue, is preferable to the one conventionally used on both theoretical and empirical grounds. In contrast to the marginally...