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Institutions and economic growth: Cases of China and India

Kimya, Fırat
This study inquires why China managed to generate more economic growth than India despite the premises of Acemoğlu and Robinson’s theory of inclusive and extractive institutions which claim that sustainable economic growth is only possible under inclusive institutions. This study attempts to show that Acemoğlu and Robinson’s theory is insufficient to explain the case of China. By using the most-likely case methodology, the period of 1979-2010 is analyzed and economic growth performance of China and India are compared. While the dependent variable of this study is defined as the level of economic growth of a country which is measured by GDP and GDP per capita values, the type of the institutions –whether inclusive or extractive– that a country possesses are used as independent variables. All in all, it is argued in this paper that the theory of inclusive and extractive institutions is insufficient in explaining the better developmental performance of China over India. In order to present a more detailed and comprehensive answer for the case at hand, this study presents four alternative explanations which are more helpful in explaining the role of various dynamics in Chinese economic growth when compared to explanations presented by the theory of inclusive and extractive institutions.