Institutions and growth - a ranking of OECD countries

It is useful to know whether the institutional rules of individual countries display characteristics with which a high per capita income can be achieved. Such an appraisal can be made with the institutional index that has been developed by the Ifo Institute together with Theo Eicher of the University of Washington, Seattle. The index provides a means of measuring the quality of a country's institutions. For 2009 the changes in the index run parallel to the changes in per-capita income in the OECD countries. This means that the mean of institutional indicators, with their time delays, are good predictors of economic growth in the OECD countries. Responsible for the rise in the institutional index and hence also for the growth of OECD countries as a whole were above all an increase in human capital, labour-market reforms and structural adjustments in government spending.