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Spatial Spillovers in the Development of Institutions

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  • Harry Kelejian
  • Peter Murrell

    ()
    (Department of Economics, University of Maryland)

  • Oleksandr Shepotylo

Abstract

We examine spatial spillovers between countries in the development of institutions. Our dependent variables are three measures of institutions that relate to politics, law, and governmental administration. The major explanatory variable on which we focus is a spatial lag of the dependent variable, that is, the level of similar institutions in bordering countries. We also consider long-term determinants of institutions that have been previously examined in the literature, such as legal origin, religious groupings, ethnolinguistic fractionalization, resource base, and initial level of GDP per capita. Our framework of analysis is a spatial panel data model. Because of missing observations, our panel data set is not balanced, which causes special problems in estimating spatial models. These problems are explicitly recognized in our estimation procedure, which implements new results in spatial econometrics. Spatial spill-over effects between countries are statistically significant and economically important. We provide evidence of the size of the general equilibrium effects of spatial spillovers by examining a counter-factual the non-existence of the Soviet Union. Our central conclusions are bolstered by robustness tests that involve alternative treatments of GDP per capita and the inclusion of fixed effects.

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Bibliographic Info

Paper provided by University of Maryland, Department of Economics in its series Electronic Working Papers with number 07-001.

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Length: 38 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:umd:umdeco:07-001

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Postal: Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
Web page: http://www.econ.umd.edu/

Order Information:
Postal: Ms. Elizabeth Martinez, Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
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Keywords: institutions; spatial econometrics; governance; neighborhood effects; spatial spillovers;

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References

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Citations

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Cited by:
  1. Ahmad, Mahyudin & Hall, Stephen G., 2012. "Institutions-growth spatial dependence: An empirical test," MPRA Paper 42360, University Library of Munich, Germany.
  2. Fidrmuc, Jan & Karaja, Elira, 2013. "Uncertainty, informational spillovers and policy reform: A gravity model approach," European Journal of Political Economy, Elsevier, vol. 32(C), pages 182-192.
  3. G. Faber & M. Gerritse, 2012. "Deep determinants or interactions: explaining spatial patterns in human rights," Working Papers 12-17, Utrecht School of Economics.
  4. Ahmad, Mahyudin & Hall, Stephen G., 2012. "Institutions and growth: Testing the spatial effect using weight matrix based on the institutional distance concept," MPRA Paper 42294, University Library of Munich, Germany.
  5. Nicolas Debarsy & Cem Ertur, 2009. "Testing for Spatial Autocorrelation in a Fixed Effects Panel Data Model," Post-Print halshs-00414133, HAL.
  6. Harry Kelejian & Ingmar Prucha, 2010. "Spatial models with spatially lagged dependent variables and incomplete data," Journal of Geographical Systems, Springer, vol. 12(3), pages 241-257, September.
  7. Michal Bernard Pietrzak, 2013. "Interpretation of Structural Parameters for Models with Spatial Autoregression," Equilibrium, Wydawnictwo Naukowe Uniwersytetu Mikolaja Kopernika, vol. 8, pages 129-155.
  8. Oleksandr Shepotylo, 2010. "Spatial complementarity of FDI: example of transition countries," Discussion Papers 29, Kyiv School of Economics.

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