• Institutions = rules & organizations affecting economic growth.
• In developing countries? Weak framework! 😬
• Why it's bad? Slows down growth and development.

📚 Real-World Example: Think of institutions like the pillars of a bridge. If they're weak, the bridge might collapse

• Problems
  • Unpredictable laws 🌀
  • Slow court processes ⏳
  • Corruption 😡
• Outcome? Uncertainty & favoritism to the elite. Bad news for economic growth!

📚 Real-World Example: Imagine ordering online, but never knowing when or if it'll arrive. Would you trust that service?

• Needs: Taxes for health, education, infrastructure.
• Issues in developing countries:
  • Complicated tax procedures 🤯
  • Tax breaks for wealthy influencers 💸
  • Corruption again! 😡
  • Huge informal sector = less taxes 🚫💰

📚 Real-World Example: Imagine a leaky bucket (the tax system) trying to water plants (the economy). If it's too leaky, the plants won't grow!

• Unclear property rights = less investment 📉
• Hernando de Soto's view: Missing property rights = BIGGEST growth barrier.
• 5.3 billion people = “dead capital” 🪦💰 (Can't use assets for income!)
• Land rights also shaky in developing countries. Bad for rural folks.

📚 Real-World Example: Would you build a sandcastle near waves? 🌊 That's investing without clear property rights!