The Role of Institutions in Economic Development

Abstract

Despite the global liberalization of trade, financial and technological flows, there still are tremendous disparities in terms of income per capita and growth rates across countries (Hall and Jones, 1999). Among the plethora of explanations proposed in the economic literature on this phenomenon, institutions have become a common factor for long-term economic performance (Acemoglu et al., 2001) as well as international activities such as trade (Dollar and Kraay, 2003) and foreign direct investments (Ali et al., 2010) and the legitimacy or failure of states (Subramanian et al., 2004). Given these pivotal implications of institutions for the social and economic welfare of countries, this chapter proposes to review the current institutional background of countries in the Middle East and North Africa (MENA) region and provide some insights into the historical and more recent evolution of formal institutions in this part of the world.