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Spatial spillovers in the development of institutions

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  • Kelejian, Harry H.
  • Murrell, Peter
  • Shepotylo, Oleksandr

Abstract

We examine spatial spillovers in institutional development. Dependent variables are institutional measures reflecting politics, law, and governmental administration. The explanatory variable of interest is the level of institutions in bordering countries—a spatial lag of the dependent variable. Our spatial model directly leads to the identification strategy for the endogenous spatial lag. We implement new results in spatial econometrics to counter missing-data problems usually rife in spatial empirics. Spatial institutional spillovers are statistically significant and economically important. A counter-factual exercise – the non-existence of the USSR – reveals large direct and indirect spillovers. Numerous robustness exercises bolster conclusions, including yearly cross-section regressions, fixed effects estimates, and adding many extra explanatory variables. Moreover, we provide a new theoretical result showing the robustness of estimates in the presence of omitted variables. We extend the core model, allowing different effects for better and worse neighbors, using inverse distance weights, estimating the spatial-Durbin model, and using Polity's institutional measure.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 101 (2013)
Issue (Month): C ()
Pages: 297-315

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Handle: RePEc:eee:deveco:v:101:y:2013:i:c:p:297-315

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Institutions; Spatial econometrics; Governance; Neighborhood effects; Spatial spillovers;

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Citations

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Cited by:
  1. Nicolas Debarsy & Cem Ertur, 2009. "Testing for Spatial Autocorrelation in a Fixed Effects Panel Data Model," Post-Print halshs-00414133, HAL.
  2. Ahmad, Mahyudin & Hall, Stephen G., 2012. "Institutions-growth spatial dependence: An empirical test," MPRA Paper 42360, University Library of Munich, Germany.
  3. Raul Caruso & Ilaria Petrarca & Roberto Ricciuti, 2014. "Spatial Concentration of Military Dictatorships in Sub-Saharan Africa (1977-2007)," CESifo Working Paper Series 4802, CESifo Group Munich.
  4. Harry H. Kelejian & Gianfranco Piras, 2013. "A J-Test for Panel Models with Fixed Effects, Spatial and Time," Working Papers 201303, Regional Research Institute, West Virginia University.
  5. Harry Kelejian, 2014. "Omitted factors and spatial lags in the dependent variable," Letters in Spatial and Resource Sciences, Springer, vol. 7(1), pages 23-33, March.
  6. Fidrmuc, Jan & Karaja, Elira, 2013. "Uncertainty, informational spillovers and policy reform: A gravity model approach," European Journal of Political Economy, Elsevier, vol. 32(C), pages 182-192.
  7. G. Faber & M. Gerritse, 2012. "Deep determinants or interactions: explaining spatial patterns in human rights," Working Papers 12-17, Utrecht School of Economics.
  8. Michal Bernard Pietrzak, 2013. "Interpretation of Structural Parameters for Models with Spatial Autoregression," Equilibrium, Uniwersytet Mikolaja Kopernika, vol. 8, pages 129-155.
  9. Oleksandr Shepotylo, 2010. "Spatial complementarity of FDI: example of transition countries," Discussion Papers 29, Kyiv School of Economics.
  10. Harry Kelejian & Ingmar Prucha, 2010. "Spatial models with spatially lagged dependent variables and incomplete data," Journal of Geographical Systems, Springer, vol. 12(3), pages 241-257, September.
  11. Ahmad, Mahyudin & Hall, Stephen G., 2012. "Institutions and growth: Testing the spatial effect using weight matrix based on the institutional distance concept," MPRA Paper 42294, University Library of Munich, Germany.

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