The economic growth and development literature emphasizes that investment in technology and physical and human capital is essential for achieving higher levels of development. Political and economic institutions are also relevant in this process. With a sample of 5,503 Brazilian municipalities, this study carries out a development accounting exercise and measures the effects of institutional quality on per capita gross domestic product (GDP), physical capital intensity, human capital stock, and productivity. The empirical results indicate that institutional quality affects GDP per capita mainly through human capital accumulation and total factor productivity.
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We thank an anonymous referee for many insightful comments. Nakabashi gratefully acknowledges financial support from the Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPQ) through grant 309438/2013‐6.
© 2023 John Wiley & Sons Ltd.
- Brazilian municipalities
- development accounting
- income level