Institutions, Economic Growth and International Competitiveness: A Regional Study

Abstract

This chapter focuses on institutions as key determinants of economic growth. We explore the effect of institutions in the Caribbean region that tends to be overlooked within mainstream IB research. Using a three-stage model, we test for cross-national variance and the influence of institutions on productivityProductivityand output. We found that institutions influence long-run economic performance and that some institutions matter more than others. Our evidence suggests that institutions designed to regulate and legitimise markets and constrain inefficiencies, significantly affect levels of productivityProductivity. In turn, institutions designed to stabilise markets could have a growth-maximising effect beyond which increased bureaucracy reduces incentives to increase productivity.