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The effect of institutions on economic growth: A global analysis based on GMM dynamic panel estimation

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  • Siddiqui, Danish Ahmed
  • Ahmed, Qazi Masood

Abstract

This study examines how institutional indicators influence economic growth in a theoretical framework proposed by North (1981). Thirty-one indicators each covering 84 countries over a span of 5 years have been used to extract factors based on principal component analysis. Factors based on these indicators are classified as institutional and policy rents, political rents and risk-reducing technologies. These institutional factors are then used in a formal growth model employing panel OLS and GMM-based estimation methodologies. The findings suggest that favorable institutions positively affect economic growth. This study also shows that for a developing country the institutional and policy rent is more important than other two indices that curb political rents and those that reduce transaction risks. This study also highlights the positive complementarities between index of political rents and index of risk-reducing technologies.

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Bibliographic Info

Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 24 (2013)
Issue (Month): C ()
Pages: 18-33

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Handle: RePEc:eee:streco:v:24:y:2013:i:c:p:18-33

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Web page: http://www.elsevier.com/locate/inca/525148

Related research

Keywords: Institutions; Factor analysis; Index; GMM panel;

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Cited by:
  1. Sonora, Robert, 2014. "Institutions and Economic Performance in Mexican States," MPRA Paper 58368, University Library of Munich, Germany, revised 15 Jun 2014.
  2. Alexi Danchev & Erkan Ilgün, 2013. "Job Performance, Job Satisfaction and Human Capital in the Labour Market in Bosnia," International Journal of Management, Knowledge and Learning, International School for Social and Business Studies, Celje, Slovenia, International School for Social and Business Studies, Celje, Slovenia, vol. 2(1), pages 25-44.

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