Strong institutions are associated with high levels of real per capita income because they shape the overall conditions for investment and growth (IMF 2003). For example, where corruption and the appropriation of private property are common, potential returns on investment are reduced or even eliminated altogether. Political control of resources can also limit the extent to which firms can obtain the inputs they need to produce. Formal institutions also influence the balance between diversionary (rent-seeking) and productive activities in society (Hall and Jones 1999). Countries with institutions that support productive activities such as capital accumulation, skill acquisition, invention and technology transfer produce much higher levels of output per year.