Lessons for development from Pacific Island countries

Abstract

This paper argues that initial conditions, in terms of the set of institutions (put) in place at the birth of a nation, matter for future prosperity. Several propositions from the New Institutional Economics literature are corroborated by evidence from fourteen Pacific island countries that lead to recommend policy settings necessary for the economic development. These recommendations include the establishment of clear property rights with the absolute paramountcy of the rule of law, a simple regulatory system that is subject to minimal discretion, an active media, and an independent judiciary. On the last two, foreign participation is necessary given the small and enclave nature of these professions.