We introduce financial frictions in a two sector model of international trade with heterogeneous agents. The level of specialization in the economy (economic development) depends on the quality of financial institutions. Underdeveloped financial markets prohibit an economy to specialize in...

One important channel by which market-augmenting government affects economic growth is through its effect on market-mobilized capital the level of capital mobilized by market mechanisms. Market-augmenting government, which is measured in part by both statutory law and law enforcement, affects...

The paper tests the hypothesis of a positive impact of democratization on growth, economic development and changes in well-being. We construct an empirical model to explain the impact of political institutions (democracy), economic institutions, financial market efficiency, scientific...