Advanced Search
MyIDEAS: Login to save this article or follow this journal

The role of institutions in cross-section income and panel data growth models: A deeper investigation on the weakness and proliferation of instruments

Contents:

Author Info

  • Vieira, Flávio
  • MacDonald, Ronald
  • Damasceno, Aderbal

Abstract

This paper investigates the role of institutions in determining per capita income levels and growth. It contributes to the empirical literature by using different variables as proxies for institutions and by developing a deeper analysis of the issues arising from the use of weak and too many instruments in per capita income and growth regressions. The cross-section estimation suggests that institutions seem to matter, regardless if they are the only explanatory variable or are combined with geographical and integration variables, although most models suffer from the issue of weak instruments. The results from the growth models indicate that: there is mixed evidence on the role of institutions and such evidence is more likely to be associated with law and order and investment profile; government spending is an important policy variable; collapsing the number of instruments results in fewer significant coefficients for institutions.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0147596711000564
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

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

Volume (Year): 40 (2012)
Issue (Month): 1 ()
Pages: 127-140

as in new window
Handle: RePEc:eee:jcecon:v:40:y:2012:i:1:p:127-140

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622864

Related research

Keywords: Institutions; Income levels and growth; Cross-section and panel data analysis; Weak instruments and instrument proliferation;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, Econometric Society, vol. 65(3), pages 557-586, May.
  2. Hall, Alastair R & Rudebusch, Glenn D & Wilcox, David W, 1996. "Judging Instrument Relevance in Instrumental Variables Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 283-98, May.
  3. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," NBER Working Papers 10481, National Bureau of Economic Research, Inc.
  4. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers, Economics Group, Nuffield College, University of Oxford 104, Economics Group, Nuffield College, University of Oxford.
  5. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," NBER Working Papers 10568, National Bureau of Economic Research, Inc.
  6. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  7. William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," Working Papers, Center for Global Development 15, Center for Global Development.
  8. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers, Centre for Economic Performance, LSE dp0007, Centre for Economic Performance, LSE.
  9. Maurice Bun & Frank Windmeijer, 2007. "The weak instrument problem of the system GMM estimator in dynamic panel data models," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP08/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  10. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  11. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 90(4), pages 643-665, November.
  12. David E. Bloom & Jeffrey D. Sachs, 1998. "Geography, Demography, and Economic Growth in Africa," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 207-296.
  13. Johnson, Paul & Durlauf, Steven N & Temple, Johnathan R. W., 2004. "Growth Econometrics," Vassar College Department of Economics Working Paper Series, Vassar College Department of Economics 61, Vassar College Department of Economics.
  14. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(4), pages 1127-70, November.
  15. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 407-37, May.
  16. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  17. Rodrik, Dani, 1999. " Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses," Journal of Economic Growth, Springer, Springer, vol. 4(4), pages 385-412, December.
  18. Michael Clemens & Samuel Bazzi, 2009. "Blunt Instruments: On Establishing the Causes of Economic Growth," Working Papers, Center for Global Development 171, Center for Global Development.
  19. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, American Economic Association, vol. 89(3), pages 379-399, June.
  20. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
  21. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, Springer, vol. 9(2), pages 131-165, 06.
  22. Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
  23. Anna Mikusheva & Brian P. Poi, 2006. "Tests and confidence sets with correct size when instruments are potentially weak," Stata Journal, StataCorp LP, StataCorp LP, vol. 6(3), pages 335-347, September.
  24. Kazuhiko Hayakawa, 2005. "Small Sample Bias Propreties of the System GMM Estimator in Dynamic Panel Data Models," Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University d05-82, Institute of Economic Research, Hitotsubashi University.
  25. Jinyong Hahn & Jerry Hausman, 2002. "A New Specification Test for the Validity of Instrumental Variables," Econometrica, Econometric Society, Econometric Society, vol. 70(1), pages 163-189, January.
  26. Cragg, John G. & Donald, Stephen G., 1993. "Testing Identifiability and Specification in Instrumental Variable Models," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 9(02), pages 222-240, April.
  27. John Shea, 1996. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0193, National Bureau of Economic Research, Inc.
  28. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1733, Harvard - Institute of Economic Research.
  29. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, Elsevier, vol. 126(1), pages 25-51, May.
  30. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(4), pages 518-29, October.
  31. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, American Economic Association, vol. 91(5), pages 1369-1401, December.
  32. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521844413.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Marta Spreafico, 2013. "Institutions, the resource curse and the transition economies: further evidence," DISCE - Quaderni dell'Istituto di Politica Economica, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) ispe0064, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jcecon:v:40:y:2012:i:1:p:127-140. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.