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Regional differences in economic growth have been observed within many countries. Our story emphasises three region-specific factors driving growth—capital, labour and political factors. Conditional on differences in production factor ( i.e. , labour and capital) variations across democratic states, what role do differences in underlying “political factors” across regions play in accounting for regional growth disparities? We build a political economy model of endogenous growth where regions have the same political institutions, but experience different (and estimable) distributions over voter political biases ( i.e. , our “political factors”). In our model, political factors affect regional productivity as a consequence of politico-economic equilibrium . We discipline our regional growth accounting exercises by calibrating/estimating each model to American state-level economic and political-survey data. We show that the capital factor is the predominant driving force behind growth in American states. Nevertheless, regional variations in distributions of voter's political biases also account a great deal for regional growth disparities. We also evaluate how much politics would have distorted agents' welfare and regional growth, were regional economies given the opportunity to live under an efficient social planner's allocation system; and, if agents were to live under the same democratic system but where all voters have equal voting influence. [ABSTRACT FROM AUTHOR]

This paper addresses an important source of variation within democracies — the degree of institutionalization. The concept of institutionalization describes the extent to which politics takes place, and is believed to take place, via formal political institutions. Countries vary in their degree of institutionalization, hence, in the degree to which political actors pursue their goals via conventional politics or via “alternative political technologies”. This paper postulates that if politics is conducted largely outside of formal channels, the structure of the formal channels should not matter much as a determinant of policy outcomes. To address this issue this paper proposes a new index of institutionalization and with it revisits seminal work regarding the impact of constitutions on public spending. The findings show that the effect of constitutional rules on policy outcomes is conditional on the degree of institutionalization. [ABSTRACT FROM AUTHOR]