Consider two countries: A and B. In country A there are well-defined private property rights and in country B there are no private property rights

If the institutions hypothesis holds:
a) Which of the two countries is likely to grow faster?
b) Is the slower growing economy permanently disadvantaged?

The institution hypothesis claims that differences in institutions are at the root of the differences in prosperity across the world.
a) Private property rights is an example of an institution. When citizens of a country enjoy private property rights they are assured that nobody can take their assets from them arbitrarily. Hence, private property rights act as incentives to increase productivity and this in turn increases the quantity of assets owned. In the absence of private property rights, the incentive to work is lower because there is no guarantee that assets or wealth will be retained by the owner. Hence, productivity is affected. Since country A has property rights, it is likely to grow faster than country B, and so is likely to be more prosperous.
b) No, the slower growing economy is not permanently disadvantaged. This is because institutions in an economy are developed by society and are not permanent. Institutions can be changed from time to time. Hence, if country B implements private property rights, it is likely to shed its