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What is the effect of political institutions on economic performance using an econometric model with a sample of 109 countries, carlos pereira and vladimir teles find that political institutions fundamentally impact developing democracies and their economic performance. Useful economic tools and concepts a model is an analytical tool that highlights some aspects of reality while ignoring others. In the early 1980s, the american economy was suffering through a deep recession the economic disorder of the 1970s lingered into the beginning of the 1980s.