State Development, Institutional Flexibility and Long-Run Economic Growth: a Cross Country Empirical Examination

Abstract

This thesis is an empirical investigation examining the impact of state development and institutional flexibility on economic growth, across fifteen developed countries from 1880 to 2008. The development of the state, particularly since the late nineteenth century, has resulted in the exponential growth of institutional complexity and living standards. While there is evidence to suggest institutional flexibility may have increased for a time during this period, evidence also indicates a subsequently decline over the course of the twentieth century, resulting in ‘rise and decline’ explanations for economic growth. This ‘rise and decline’ hypothesis is tested in this thesis in an attempt to rehabilitate the works of Mancur Olson. This thesis presents a new framework for establishing years of peak institutional flexibility and creates new data for measuring state development and institutional flexibility. It finds both improvements in state development and institutional flexibility explain changes in cross-country growth over the long run. This should come as encouragement to those interested in institutional justifications for economic growth and all interested in revitalising Olsonion explanations for the economic performance of countries over the long run.