Prosperity follows institutions that distribute power and secure broad property rights; extractive ones can grow briefly but not durably.
Acemoglu and Robinson's 2012 framework, with Nogales as the illustration — the same town split by a border, with sharply different incomes on each side. The critique is that the categories are hard to apply before you know the outcome.
In practice
- A firm operating in two neighbouring countries with identical geography and workforce finds its investment horizon differs by a decade, and the difference is contract enforcement.
- A market town where property rights are secure builds four-storey buildings; one where they are not builds single-storey ones that can be walked away from.
- Subject
- Law & Politics
- Essay
- Competing accounts of how power works