This module provides a general framework for the study of economic growth. The model allows to understand both, growth in developed and developing economies. and the ievei of income across countries. In the model. developing countries exhibit lower income because they are thought to have the equivalent of an implicit tax on capital {because of bribes or frictions for doing business]. which reduces investment. output. and wages. The question of income differences across countries is a big puzzle among economists. If you think for a moment about the issue. natural questions arise: why are the gaps so large given that capital and technology can move around the world. and that countries' populations can be educated? Part of the explanation lies in history and its by-product institutions: rules and norms that govern social and economic interactions. In this Box you have to synthesize the theoreticai and empiricai aspects that explain the gap between rich and poor nations. Theory suggests that a "tax" on capital reduces investment. wages, and output; on the ip side. in practice. weak institutions in the form of bribes or heavy regulatory burden. for instance. lead to the same result