This dissertation approaches the relationship between institutions and their impacts on development outcomes. Institutions describe formal and informal rules which structure human behavior and interactions. Because these formal and informal rules influence not only everyday actions but especially economic activity, they are a major influence on development processes and therefore present a salient research subject. The dissertation highlights two aspects; namely inclusive development – i.e. whether the entire society or only a small part can benefit from development achievements – and the relationship between democratization and poverty. The research on these topics is presented in the following four main chapters: chapter 2 presents a new index measure for inclusive development, and chapter 3 uses this index to look at drivers of inclusive development. Chapter 5 investigates whether democratization has an impact on poverty rates and chapter 6 gauges how institutional features of democracies contribute to poverty reduction. In each chapter, the specific research gaps will be explained, the relevant theory elaborated, and empirical strategy and results will be presented. Chapter 4 will give an interim conclusion for chapters 2 & 3 and chapter 7 concludes the whole dissertation.