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Handbook of Economic Growth by Steven Durlauf, Philippe Aghion

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8.5 Lesson 4: Property Rights Institutions and Contracting Institutions Both Matter, and are not Separable

Two types of institution that appear to be important for economic growth, as we have seen, are those guaranteeing private property rights and those enforcing contracts. But how precisely do they affect economic growth, and is one more important than the other? Acemoglu and Johnson (2005) have argued that these two types of institution should be strictly distinguished from one another: property rights institutions protect ordinary people against expropriation by the powerful, while contracting institutions enable private contracts between ordinary people. For these reasons, the argument continues, property rights institutions have a first-order ...

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