Chapter 4

Question 1

Why are there such big differences in wealth/development between countries? (2).
(RoI in how they manage MC.MR.MS.ML).
(Absence of FM,IHC,OT).

Answer 1

• Role of institutions in how they manage market-creation, market-regulation, market-stabilization, and market-legitimization.
• The absence of functioning markets, inadequate human capital, and outdated technology.
  Factors such as climate (geography).

Question 2

What is in market-creation? (2).
(PPR & CE)

Answer 2

• Protection of property rights.
• Contract enforcement.

Question 3

What is in market-regulation? (3)
(E.EoS.II.)

Answer 3

• Externalities.
• Economies of scale.
• Imperfect information.

Question 4

What is in market-stabilization? (3).
(Low…, Minimize…, Avert…).

Answer 4

• Low inflation.
• Minimize economic volatility.
• Avert financial crises.

Question 5

What is in market-legitimization? (3).
(Sp.Rw.Cm.)

Answer 5

• Social protection and insurance.
• Redistribution of wealth.
• Conflict management.

Question 6

Role of Institutions permits to reduce what? (2).
(TC & II)

Answer 6

• Transaction costs related to uncertainty (contract, rule of law).
• Imperfect information.

Question 7

How does these institutions reduce transaction costs regarding UNCERTAINTY? (3).
(G.L.P.)

Answer 7

• Guaranteeing the enforcement of property rights to the population.
• Limiting the actions of elites, politicians and other powerful groups.
• Promoting equality of opportunities (include competition) for the whole society.

Question 8

How does these institutions reduce transaction costs regarding INFORMATION?

Answer 8

Promoting good circulation of complete information.

Question 9

How to measure institution (quality of governance)? (6).
(C.C.P.P.P.R.)

Answer 9

• Corruption.
• Political rights.
• Public sector efficiency.
• Regulatory burden.
• Protection of property rights.
• Constraints on the executive (repetitive elections of a leader).

Question 10

What does the International Country Risk Guide (ICRG) look at? (6).
(C.B.E.R.R.R)

Answer 10

• Corruption in government.
• Rule of law.
• Bureaucratic quality.
• Ethnic tensions.
• Repudiation of contracts by government.
• Risk of expropriation.

Question 11

What are the 6 clusters of the Global Governance Index (rating the quality of institutions)?
(V&A / PS & AoV / GE / RQ / RoL / CoC).

Answer 11

1. Voice and accountability.
2. Political stability and absence of violence.
3. Government effectiveness.
4. Regulatory quality.
5. Rule of law.
6. Control of corruption.

Question 12

On what does the quality of institutions has positive and significant effect? (3).
(E.E.S.)

Answer 12

• Economic development.
• Economic growth.
• Stability of economic growth.

Question 13

What is the quality of institutions based on?

Answer 13

Subjective assessments

Question 14

Why don’t poor countries adopt good institutions?

Answer 14

There are no compelling reasons to think that societies will naturally gravitate towards good institutions.

Question 15

Who said: “Political democracy can be thought of as a metainstitution that helps societies make choices about the institutions they want” ?

Answer 15

Rodrik & Subramanian

Question 16

What does economic growth and development depend on? (3).
(Q.G.I).

Answer 16

1. The quality or efficiency of institutions.
2. Geography.
3. The integration to the world economy.
   (2 & 3 seem to interact with institutions)