The Acemoglu-Johnson-Robinson results, which show that early institutions have an
effect on current performance, are provocative and interesting. It bears reiteration,
though, that IV estimates are suggestive of an institutional impact on development, but
one just cannot be sure of what the mechanism is. By relinquishing more immediate
institutional effects on the grounds of, say, endogeneity, it becomes that much harder to
figure out the structural pathways of influence. This appears to be an endemic problem
with large, sweeping cross-country studies that attempt to detect an institutional effect.
Good instruments are hard to find, and when they exist, their effect could be the echo
of one or more of a diversity of underlying mechanisms.