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How the quality of institutions affects technological deepening in developing countries

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Author Info
Clarke, George

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Abstract

This paper assesses the effect of institutional quality on research and development (R&D) expenditures in developing countries. The paper finds that the risk of expropriation and the rule of law are correlated with R&D expenditures. Since both institutional variables increase as institutional quality improves (i.e., as risk of expropriation decreases and rule of law improves), this suggests that stronger institutions encourage greater R&D expenditures. The result for the risk of expropriation is more highly significant and far more robust than the result for the'rule of law'. Although R&D is not the primary way that developing countries gain access to technology, this result is interesting for at least two reasons. First, R&D might encourage technological deepening better than other methods that developing countries use to gain access to technology (e.g., through foreign direct investment (FDI) or capital goods imports). Second, past work has shown that another important way that developing countries gain access to technology, through FDI, is also positively correlated with institutional quality (i.e., as institutional quality improves, FDI increases).

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2603.

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Date of creation: 25 Apr 2001
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Handle: RePEc:wbk:wbrwps:2603

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Keywords: International Terrorism&Counterterrorism; Environmental Economics&Policies; Decentralization; Economic Theory&Research; Health Economics&Finance; Environmental Economics&Policies; Economic Theory&Research; Scientific Research&Science Parks; Science Education; International Terrorism&Counterterrorism;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lee, Jeong-Yeon & Mansfield, Edwin, 1996. "Intellectual Property Protection and U.S. Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 181-86, May. [Downloadable!] (restricted)
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  7. Pack, Howard & Saggi, Kamal, 1997. "Inflows of Foreign Technology and Indigenous Technological Development," Review of Development Economics, Blackwell Publishing, vol. 1(1), pages 81-98, February. [Downloadable!] (restricted)
  8. Gastanaga, Victor M. & Nugent, Jeffrey B. & Pashamova, Bistra, 1998. "Host Country Reforms and FDI Inflows: How Much Difference do they Make?," World Development, Elsevier, vol. 26(7), pages 1299-1314, July. [Downloadable!] (restricted)
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  10. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September. [Downloadable!] (restricted)
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  11. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May. [Downloadable!] (restricted)
  12. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August. [Downloadable!] (restricted)
  13. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  14. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March. [Downloadable!] (restricted)
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  15. Dahlman, Carl J. & Ross-Larson, Bruce & Westphal, Larry E., 1987. "Managing technological development: Lessons from the newly industrializing countries," World Development, Elsevier, vol. 15(6), pages 759-775, June. [Downloadable!] (restricted)
  16. Ram, Rati, 1995. "Defense expenditure and economic growth," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 10, pages 251-274 Elsevier. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ricardo N.Bebczuk, 2002. "R&D expenditures and the role of government around the world," Estudios de Economia, University of Chile, Department of Economics, vol. 29(1 Year 20), pages 109-121, June. [Downloadable!]
  2. Law, Siong Hook & Habibullah, Muzafar Shah, 2006. "Financial Development, Institutional Quality and Economic Performance in East Asian Economies," Review of Applied Economics, Review of Applied Economics, vol. 2(2). [Downloadable!]
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