INSTITUTIONS AND MACROECONOMIC PERFORMANCE: A META-REGRESSION ANALYSIS (original) (raw)
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Institutions and economic performance: A meta-regression analysis
European Journal of Political Economy, 2011
This meta-regression analysis investigates the effects of institutions on (macro)economic performance. This literature reveals a positive relationship that is conditional on heterogeneities with respect to model specifications, samples, datasets, observed timehorizons, and approaches to the potential endogeneity of institutions. The partial correlations between institutional and performance variables are particularly influenced by choice of dependent variable and treatment of institutional endogeneity. Standard tests suggest that there is an authentic empirical effect and reveal no evidence of publication bias. These findings are supported by separate investigation of primary studies with, respectively, outputgrowth and output-level as the dependent variable. Sub-sample investigations reveal an institutional effect on output growth in transition economies but a larger effect on output levels in other countries.
The New Institutional Economics integrates the theory of institutions into mainstream economics. Institutions are formally and informally the "rules of the game" in society. As such, institutions structure economic activity and influence its outcomes at both micro and macro levels. This paper reviews the empirical literature, focussing on its relevance to transitional economies. We conclude that institutions matter profoundly for economic growth and development. However, although empirical research has increased understanding of the role of institutions in the economy, many questions remain open, especially for transition economies. Knowledge gaps that invite further investigation include: transmission channels between institutions and national output; the issue of mutual endogeneity between institutions and economic growth; the structure and size of the institutional framework and its influence on economic performance; and the links between success in integration with the EU of transition economies, financial support from the EU and the quality of institutions.
Institutions and Economic Performance: A Review of the Theory and Evidence
SSRN Electronic Journal, 2000
The aim of this article is to take stock of the theoretical debate and empirical findings concerning the impact of institutions on economic performance and the channels through which the institutional impact unfolds. The review is limited to work published until 2004 due to space limitations and the exponential increase in the literature after 2004-a development that justifies a separate review in itself. We trace the evolution of the institutional approach, identify the channels through which institutional quality might affect economic performance, report the empirical findings, and assess the institutional approach's contribution to economic analysis and policy design. Our findings suggest that the institutional approach has made both theoretical and empirical contributions to economics research and has inspired policy debate, but the debate is lopsided with its focus on developing countries only.
Preliminary conclusions on institutions and economic performance
Journal of Biotechnology, 2012
Using institutional indicators describing 122 countries, we conduct an exploratory study highlighting which institutional characteristics differ across countries with different levels of income and rates of growth. We describe a country's institutions by the degree of formalization of its regulations, the depersonalization of their implementation, and by the degree of control and intervention of the state. Our findings reveal that
Empirical heterogeneity in the institutions-economic growth literature: A critical review
2020
The literature has arrived at a consensus regarding the positive effects of institutions on growth. Nevertheless, many economists argue that a unified analytical framework of institutions-growth studies is still missing and more research needs to be done to fully operationalise the institutional effects in the empirical growth analysis. This paper critically reviews the literature on institutions-economic growth nexus and carefully outlines the important dimensions of empirical heterogeneity the growing number of institutional studies have given rise to. Via a careful assessment and thorough evaluation of selected institutions-growth studies, the dimensions of heterogeneity are identified, namely modelling the institutions-growth link, measures of institutions, channel and size of effects of institutions on growth, reverse causality issue, estimation techniques and sources of institutional data. Arguably, a critical review of a similar stature is rarely done, and the findings of thi...
Heterogeneity in Institutional Effects on Economic Growth: Theory and Empirical Evidence
European Journal of Comparative Economics, 2014
This article explains the peculiarities of institutional effects on growth rates in post-communist countries. By proposing a certain dependence of the institution-growth nexus on the nature of institutional emergence, the distinction between revolutionary and evolutionary processes of institution formation is introduced. Theoretical and empirical juxtapositions show that transition countries' institutions which are constructed revolutionarily differ from those that emerge evolutionarily in a twofold manner in their relationship to growth. Growth rates of their economies are less likely to depend on the quality of economic institutions and are more likely to be a function of the maturity of political institutions. In addition, economic institutions in post-communist countries are a product of the quality of political bodies to a greater extent than their evolutionary alternatives.
Impact of Institutions on Economic Growth Across OECD Countries
Prague Economic Papers
This paper provides empirical evidence in support of the view that quality of institutions is an important determinant of medium and long-term growth in OECD countries. Regarding the methodology, a panel data analysis with two-stage least squares (2SLS) estimation will be used to account for the endogeneity of the institutional variable. Besides institutional quality, we also consider other relevant determinants of potential growth such as the initial level of GDP per capita, public debt, and structural variables typically referred to in economic growth theory. Our estimation results show a positive impact of institutions on subsequent economic growth: an increase in 1 point in institutional quality leads to an estimated increase of 16.88 percentage points in potential GDP per capita growth, in the case of high-debt countries. With this, we notice a particular relevance of institutions in countries with high levels of debt. Therefore, our findings support the necessary attention to the institutional tissue of societies since improvements in institutional quality can subsequently improve economic growth.
INSTITUTIONAL EFFECTS ON ECONOMIC PERFORMANCE IN TRANSITION: A DYNAMIC PANEL ANALYSIS
This article uses dynamic panel analysis to investigate the relationship between institutional improvement and economic performance in transition countries. The contribution of this paper is two-fold. First, we find that per capita GDP is determined by the entire history of institutional reform under transition and that, conditional on this history, per capita GDP adjusts to recent institutional changes. Moreover, we find that the time-horizon over which we measure institutional change matters, with five-year changes showing the clearest effects on current levels of per capita GDP. Secondly, we address the pronounced methodological heterogeneity of this literature. To compensate for incomplete theoretical guidance from the institutional literature, we draw upon an institutional meta-regression analysis to inform our model specification. Then we check the robustness of our estimates in a variety of ways: in particular, by a simple variant of extreme bounds analysis, in which model diagnostics are of central importance.
World Journal of Applied Economics
Using a panel set of 28 European Union member states and 8 prospective members to the bloc over a period of 1996-2014, this paper examines to what extent institutional quality (governance index) and its sub-indicators (control over corruption, government effectiveness, political stability, regulatory quality, rule of law and voice and accountability) can influence overall economic performance measured by gross value added per capita. The paper expands on existing literature by disaggregating the growth impact of institutions for all countries in the sample, developed and less developing countries. The independent variables included in the model are gross fixed capital formation as a percentage of GDP, net barter terms of trade, government size (expenditure), quality of institution and inflation while gross value added per capita is the dependent variable. Because of the weakness of the fixed effects model, system GMM is used to estimate the coefficients. Generally, the results show a positive and significant relationship between economic performance and the quality of institution. Precisely holding other things constant, a 10 units improvement in the quality of overall institution is predicted to increase gross value added per capita by 1.33 units. Also, the impact of institutional improvements on economic performance is higher and more predominant in developed countries than in less developed. A disintegrated analysis of institutions reveals that government effectiveness and voice and accountability have positive and significant impacts on economic performance of the 36 countries. However, control over corruption and political stability and absence of violence have negative signs. Also, there is no evidence of influence of regulatory quality and rule of law on economic growth.