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Institutional and Financial Determinants of Development: New Evidence from Advanced and Emerging Markets

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Author Info

  • Juan Pineiro Chousa

    (University of Santiago de Compostela)

  • Haider Ali Khan

    (GSIS, University of Denver)

  • Davit N. Melikyan

    (Institute of Management and Economic Reforms and AEPLAC)

  • Artur Tamazian

    (University of Santiago de Compostela)

Abstract

The paper tests the democratization-development hypothesis , namely that democratization has a positive impact on growth, economic development and changes in well-being. We employ a probit model to estimate the probabilistic indicator for democracy for a large sample of countries. Panel regressions are applied to explain the impact on growth of democratic political institutions, economic institutions and efficiency of financial management, along with other more "traditional" factors. The empirical findings support the hypothesis of the decisive role of democratic political and efficient economic institutions in stimulating economic growth. The main results also highlight the importance of effective allocation of financial resources. In addition to the growth regression results, it is argued, consistently with the capabilities approach to development by Sen, that many of the explanatory variables in the growth regression are positively related to development as capabilities enhancement. This is particularly true for democratic freedoms. Finally the problem of 'optimal' institutional development is discussed within the context of resource allocation, migration flows and political decision making.

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Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-326.

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Length: 35 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:tky:fseres:2005cf326

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  1. Howard Pack, 1994. "Endogenous Growth Theory: Intellectual Appeal and Empirical Shortcomings," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 55-72, Winter.
  2. Gene M. Grossman & Elhanan Helpman, 1993. "Endogenous Innovation in the Theory of Growth," NBER Working Papers 4527, National Bureau of Economic Research, Inc.
  3. Minier, Jenny A, 1998. " Democracy and Growth: Alternative Approaches," Journal of Economic Growth, Springer, vol. 3(3), pages 241-66, September.
  4. Bruce Sacerdote & Edward L. Glaeser, 2001. "Education and Religion," NBER Working Papers 8080, National Bureau of Economic Research, Inc.
  5. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2002. "People's Opium? Religion and Economic Attitudes," NBER Working Papers 9237, 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. 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.
  8. John F. Helliwell, 1994. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc.
  9. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
  10. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
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