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A new way to link development to institutions,policies and geography

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Abstract

The paper aims to examine the role of institutions relative to economic policy and geography in explaining the differential level of development across countries over time. To that end, it attempts to construct a Development Quality Index (DQI) and an Institutional Quality Index (IQI) by using multivariate statistical method of principal components. It shows that (i) higher level of IQI along with economic policy and geography factors lead to a positive improvement in the level of DQI; and (ii) results remain robust for IQI and relatively robust for economic policy and geography even when it is compared across cross-section and panel data estimation for a set of 102 countries over 1980 to 2004. The results strongly indicate that institutions matter in the context of specific economic policy mixes and geography related factors illustrated by disease burden, etc. It demonstrates that relative influence of institutions varies across stages of development.

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Bibliographic Info

Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 04-2008.

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Length: 50
Date of creation: 01 Mar 2008
Date of revision: Mar 2008
Handle: RePEc:gii:giihei:heidwp04-2008

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Keywords: Development; Institutions; Economic policy; Geography; Principal component; Instrumental variables; Panel data;

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Cited by:
  1. S. Terzi & A. Trezzini & L. Moroni, 2014. "A PLS path model to investigate the relations between institutions and human development," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1271-1290, May.
  2. Bhupatiraju, Samyukta & Verspagen, Bart, 2013. "Economic development, growth, institutions and geography," MERIT Working Papers 056, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Efendic, Adnan & Pugh, Geoff & Adnett, Nick, 2011. "Institutions and economic performance: A meta-regression analysis," European Journal of Political Economy, Elsevier, vol. 27(3), pages 586-599, September.

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