Provides much of the evidence underpinning a growing consensus among development and growth economists that successful economic development depends fundamentally on the way societies are organised and governed. They argue that ""good governance"" is a prerequisite to sustained increases in living standards.

To understand economic growth, we have to go beyond narrow economic factors to consider legal and political institutions. In the essays collected here, Steve Knack and his collaborators make important contributions to the measurement of institutional forces, notably to the quantification of the rule of law and contract enforcement." —Robert Barro, Robert C. Waggoner Professor of Economics, Harvard University"This volume collects together a number of contributions that have been crucial in developing our understanding of just how important institutions are to economic development. While accumulation of physical, human and financial capital, labor time and the development of technology may be the proximate triggers of growth, this shifts the onus of investigation to what facilitates investment in machinery, education, knowledge, and promotes the extension of credit to entrepreneurs. Good policy is one sensible response. But while correct, even the best policy response requires an anchor in an institutional environment that promotes confidence on the part of investors that their commitment of scarce resources to projects that often bear their returns at some distant point in the future, stand a good chance of actually being realized. In this volume we are presented with empirical evidence to demonstrate that institutions matter in this context, and that their impact is applicable across a range of stages of development, and diverse cultural settings. Further, we find clear conceptual articulation of why it is that institutions should have such impacts. Finally, the contributions show that institutions of relevance are not confined purely to formal institutions enshrined in legal codes, but that informal values and social networks play a central role in long run economic progress. Together they constitute an important qualifier to any development strategy that focuses too narrowly on policy responses without considering the institutional environment in which such policy is implemented." —Johannes Fedderke, Gencor Professor of Economics, University of Witwatersrand"Mancur Olson was one of the cleverest, quirkiest economists not to have won the Nobel Prize. His path-breaking ideas about the importance of institutions, both formal and informal, for economic prosperity fueled a remarkable burst of theoretical and empirical research by his colleagues and students. Steve Knack's valuable new volume brings together the highlights of this very fruitful period of collaboration." —Robert D. Putnam, Malkin Professor of Public Policy, Harvard University