Cross-Country Income Distribution and Institutions

This paper describes the underlying determinants of country`s income generally distinguished in economic growth literature, namely geography, international trade (market integration), culture, and institutions. The latter is viewed as the most significant one and is examined in terms of three theoretical approaches such as neo-institutionalism, the concept of «social infrastructure», and inclusive-exclusive dichotomy. Empirical part of the research compares explanatory power of the theoretical frameworks presented with them being expressed numerically in order to be assessed in the linear model of income. The most potent measure of institutions is then compared with other factors of income in the extended model. The results of the research establish statistical significance of institutional factor when measuring country`s level of income alongside their positive correlation. The positive significant effect remains when institutions are controlled for as well.