Why Institutions Fail - The Case of Ghana's Cocoa Sector.

Abstract

The world can literally be divided into two groups- the haves and the have nots. While some countries are associated with wealth and deemed a paradise; due to high living standards, others are noted for hunger, disease and low incomes. There has been significant research to explain the reason for this gap; one of the most recent ones being the institutions hypothesis. This work examines the problem of inequality in development. This is done by dwelling on existing research on development; and mainly on the hypothesis that inclusive institutions are the key to development. The main aim here is to establish the link between institutions and development and to investigate this relationship, using the cocoa sector in Ghana. Within this framework, first, an insight into the characteristics of under development in Ghana and in its cocoa growing areas, is given. Second, besides the institution hypothesis, existing researches that have sought to explain the cause of under development, are also reviewed. Then, using economic indicators such as GDP per capita and life expectancy as the measurement units for living standards, a relationship between the development of Ghana on the basis of cocoa sector and development theories, especially the institutions hypothesis is established. This study explains what makes institutions good and why the same results are not duplicated everywhere, especially in Ghana and other developing countries. Key Words Development, Institutions, Inequality, Living Standards, Ghana’s Cocoa Production.