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Submitted by Guilherme Lichand on
Better institutions will on average yield better economic outcomes, in particular higher returns to economic investments. Higher returns are usually linked to higher risk. The 2008-09 crisis was the materialization of a low-likelihood but massive-impact risk. I hence see no contradiction of such an event with the findings of the Development and Institutions literature. Moreover, developed economy's institutions are more adaptive to evolving challenges and should therefore, in principle, be able to cope with the need of strongly regulating financial sector innovations.