Abstract
This paper empirically investigates the institutions-growth relationship of Pakistan by measuring the indirect effect of political institutions on the economic performance through economic institutions and de jure political power. A GMM technique is employed on time series data for the period 1980-2014. We find evidence that political institutions contribute towards economic performance only through economic institutions. And they undermine economic development if the de jure political power is exercised. These results suggest that manipulation of de jure political power by elites for personal interests seems to be major obstacle in the way of establishing inclusive institutions, which are a pre-requisite for increasing economic performance. Hence, we propose to undertake structural reforms in all spheres of polity and economy.