Political versus economic institutions in the growth process

•The paper aims at establishing the different ways in which economic and political institutions affect growth.•We use a mixture of regression models that allows for the endogenous determination of both the number of growth regimes and the variables that determines to which regime a country belongs.•We find that political institutions are a key determinant of regime membership, but have no direct impact on growth within regimes.•In contrast, economic institutions affect growth within regimes and are particularly important for countries with weak political institutions. After a decade of research on the relationship between institutions and growth, there is no consensus about the exact way in which these two variables interact. In this paper we re-examine the role that institutions play in the growth process using data for developed and developing economies over the period 1975–2005. Our results indicate that the data is best described by an econometric model with two growth regimes. Political institutions are the key determinant of which regime an economy belongs to, while economic institutions have a direct impact on growth rates within each regime. These findings support the hypothesis that political institutions are one of the deep causes of growth, setting the stage in which economic institutions and standard covariates operate.