ABSTRACT
The positive role of institutions in development has been widely assessed and confirmed; fundamentally, institutions cause economic growth and development. The obvious next question for some scholars has naturally been to know how countries acquire good institutions. Rodrik explained that countries face two strategies to optimize their institutions: copying well-functioning institutions from advanced countries, or taking advantage of local knowledge and engaging in an experimentation process of institutional designs. The author focuses in this chapter on terms-of-trade (TOT) instability as a source of instability, since most of developing countries rely on the export sector of primary products and are dependent on world markets, making them particularly sensitive to TOT fluctuations. In this chapter they are interested in knowing how TOT instability can affect the quality of democracy. The Polity IV project from the University of Maryland provides a database about several indicators of democracy.
