Institutional Possibility Frontier and Total Factor Productivity: Towards a Theoretical Synthesis

Institutional Possibility Frontier and Total Factor Productivity:
Towards a Theoretical Synthesis

Akhremenko A.S.,

Dr. Sci. (Polit. Sci.), Professor, Senior Researcher, Laboratory for political and psychological research, HSE University, Moscow, Russia,

elibrary_id: 124097 | ORCID: 0000-0001-8002-7307 | RESEARCHER_ID: L-3000-2015

Lokshin I.M.,

Junior Researcher at the Laboratory of Qualitative and Quantitative Methods of Analysis of Political Regimes, National Research University Higher School of Economics; Lecturer at the Department of Political Science, National Research University Higher School of Economics,

elibrary_id: 809751 |

Petrov A.P.,

Dr. Sci. (Applied Math.), Senior Researcher, Keldysh Institute for Applied Mathematics (Russian Academy of Science),

elibrary_id: 15671 | ORCID: 0000-0001-5244-8286 | RESEARCHER_ID: R-6729-2016

DOI: 10.17976/jpps/2016.06.07

For citation:

Akhremenko A.S., Lokshin I.M., Petrov A.P. Institutional Possibility Frontier and Total Factor Productivity: Towards a Theoretical Synthesis. – Polis. Political Studies. 2016. No. 6. P. 95-113. (In Russ.).


This paper outlines a link between two theoretical perspectives on the prerequisites of high institutional quality and long run growth. One framework is based on the trade-off between disorder and dictatorship and introduces the notion of the institutional possibility frontier (IPF). The idea of IPF implies that social institutions can be situated on the continuum between two extrema of dictatorship and disorder; each point on the continuum has an associated level of social losses. It is implied that the dictatorship-disorder trade-off is more severe in some societies than in others. The other theoretical perspective focuses upon the role of total factor productivity (TFP) as a parameter underlying long run growth (TFP can be represented as a parameter A in the Cobb-Douglas function). It is possible to associate different social groups with different productivity factors in the Cobb-Douglas function and, further, with different institutional preferences on the dictatorship-disorder continuum. As a result, the linkage between TFP and IPF emerges and the effects of TFP can be interpreted in the framework of the IPF theory. The formalization of the linkage between two theoretical perspectives is presented in outline and it is shown that high TFP can mitigate the trade-off between dictatorship and disorder. The second part of the paper contains a tentative empirical analysis of the link between TFP and major institutional characteristics. It is demonstrated that this link is present and has from medium to high strength. An interesting innovation concerns the method of estimating TFP. By and large, the paper sheds some light on the nature of TFP and designates directions for further research on the fundamental conditions for high-quality development.

total factor productivity; institutional possibility frontier; institutional quality; quality of government; sustainable economic growth; social conflict.

Content No. 6, 2016

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