Institutions, Development and Poverty

This paper explores the relationships between institutions, growth and poverty, presenting the multiplicity of the causal links connecting these three terms. There is currently a consensus that institutions play a crucial role in both development and poverty reduction, but the definitions of these three concepts, as well as the links between them, are still matters of controversy. The paper shows that institutions play a critical role in the processes leading to or out of poverty. The position and role of institutions explain the endogenous nature of these processes, as institutions are the underlying causes of many threshold effects and poverty traps.