The asymmetric evolution of economic institutions: evidence from dynamic panel quantile regression with iv and fixed effects

We use dynamic panel quantile regressions with fixed effects and instrumental variables (IV) to detect asymmetric responses in the dynamics of economic institutions. The use of IV aims at reducing a potential bias due to correlation between initial conditions and fixed effects. Our conditional mean analyses reach standard results: economic institutions depend positively on regime durability, on the quality of political institutions, on human capital and GDP per capita. But the quantile models identify heterogeneous response of the economic institutions to idiosyncrasies. Adverse events tend to worse the economic institutions of countries with better political institutions and more durable regimes, while positive random circumstances cause the economic institutions of countries with better political institutions and longer political regime to improve more intensively. Less robust results indicate a stronger effort to ameliorate economic institutions when adversities hit a country with higher human capital and higher GDP per capita. These results have not been previously reported. Our exercises include 129 countries ranging from 1984 to 2014.