Recent works on economic growth stress the importance of institutions as the main determinant of productivity growth. Yet, this literature disregards the effects of demand growth on productivity growth, as suggested by Kaldor–Verdoorn’s law. The objective of this paper was to test the direct and indirect impacts of institutions on productivity growth, controlling for human and physical capital, as well as for demand growth. Tests were performed for Brazilian municipalities and two measures of institutions were explored. Instrumental variables were used to cope with the endogeneity between economic performance and institutions. The regression results suggest that both supply-side factors and demand growth are important to explain productivity growth. Most importantly, by considering the interaction between demand growth and institutions, the results indicate that in municipalities with inclusive institutions and higher human capital, productivity growth responds more strongly to demand growth.

中文翻译：

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卡尔多–弗多恩的法律和机构：来自巴西市政当局的证据

关于经济增长的最新著作强调了制度作为生产力增长的主要决定因素的重要性。然而，正如卡尔多·弗多恩定律所表明的那样，这些文献没有考虑需求增长对生产率增长的影响。本文的目的是检验机构对生产率增长，控制人力资本和实物资本以及需求增长的直接和间接影响。对巴西市政当局进行了测试，并探索了两种机构评估方法。工具变量被用来应对经济绩效和制度之间的内生性。回归结果表明，供应方因素和需求增长对解释生产率增长都很重要。最重要的是，通过考虑需求增长与机构之间的相互作用，