October 25, 2024 — Why have some countries grown rich and others not? The three winners of this year’s Nobel Prize — Daron Acemoglu, Simon Johnson and Jim Robinson — offered a one-word answer: Institutions. Specifically, “inclusive institutions,” which refers to an open society, accountable government, economic freedom, and the rule of law.
To illustrate concretely, the World Bank offers country-by-country indicators of six aspects of institutional quality: control of corruption, voice and accountability, government effectiveness, absence of violence, regulatory quality, and rule of law. At the top of the rankings are Denmark and Finland. At the bottom are Equatorial Guinea and South Sudan. Across a broad set of countries, these indicators are indeed highly correlated statistically with national income per capita.