The paper uses nonparametric methodology to examine the role of institutions in understanding differential levels of development ac ross countries. This technique estimates first order derivatives for every country allowing a deeper look into the impact of institutions on development. The preliminary cross-country findi ngs show that (i) institutional quality positively and significantly increases development quality; and (ii) results remain ‘robust’ for different model specifications and choice of additi onal control variables. The analysis is carried out for a set of 102 countries over 1980 to 2004. Similar to parametric results established in the literature, the nonparametric an alysis lends further support to the view that institutions matter in the context of economic poli cies and geographic factors.