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Institutional Quality and Economic Growth: Maintenance of the Rule of Law or Democratic Institutions, or Both?

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  • James L. Butkiewicz

    (Department of Economics,University of Delaware)

  • Halit Yanikkaya

    (Department of Economics, Celal Bayar University)

Abstract

Analysis of the factors determining rates of economic growth has found that country-specific characteristics have important effects on growth performance. Empirical evidence to date suggests that maintenance of the rule of law promotes growth, while adopting democratic institutions does not appear to improve growth performance. We find that these conclusions are very sensitive to sample selection and to estimation technique. When an identical sample of countries is used, we find that countries with democratic institutions do enjoy superior growth performance. The relationship between growth and democratic institutions is also sensitive to the estimation technique used. Estimates using instrumental variable techniques suggest that democratic institutions do experience better growth performance. These results are especially relevant for developing nations. Length pages: 25 pages

Suggested Citation

  • James L. Butkiewicz & Halit Yanikkaya, 2004. "Institutional Quality and Economic Growth: Maintenance of the Rule of Law or Democratic Institutions, or Both?," Working Papers 04-03, University of Delaware, Department of Economics.
    • Handle: RePEc:dlw:wpaper:04-03
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    More about this item

    Keywords

    Rule of Law; Democracy; Economic Growth;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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