The primary reason why countries around the world have not converged to the same level of income is that they
A) do not have access to the same resources.
B) do not have the same level of the capital stock.
C) have different numbers of people.
D) have different institutions.
E) do not have access to the same technology.

Question

Quizplus · Accepted Answer

Institutions play a crucial role in economic development as they determine the rules of the game and shape incentives for economic agents. Countries with effective institutions are more likely to attract investments, encourage innovation, and minimize corruption, leading to higher levels of economic growth and income. On the other hand, countries with weak institutions are more likely to experience political instability, social conflict, and economic stagnation. Therefore, differences in institutional quality explain the divergence in income levels among countries around the world.

The Primary Reason Why Countries Around the World Have Not