Social Cohesion, Institutions, and Growth - Working Paper 94

"Poor institutional quality" and "failure to implement better policies" are frequently identified as the causes of growth collapses, endemic poverty, and civil conflict. This new working paper, co-authored by CGD non-resident fellow William Easterly, addresses systematically the constraints to policy reform in developing countries by examining the strength and direc­tion of the relationship between social structures, political institutions, and economic policies. Specifically, the authors argue that one of the primary reasons why even good politicians in countries all over the world--but especially in low-income countries--often enact bad policies is that they experience sig­nificant social constraints on their efforts to bring about reform. These constraints are shaped by the degree of "social cohesion" within their country. This working paper shows that social cohesion determines the quality of institutions, which in turn has important impacts on whether and how pro-growth policies are devised and implemented.