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Rebundling Institutions

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  • Kalkschmied, Katja

Abstract

This study investigates the joint effects of legal property rights and contracting institutions on economic development. In a two-step panel estimation procedure that uses data of 130 countries over the period 2005-2015, I find that the long-term income effects of legal property rights institutions depend on the quality of legal contracting institutions. This supports the hypothesis that the two different types of institutions provide interrelated incentives and constraints on economic decisions and productive activities. According to the estimates, the marginal effects of increasing executive constraints are significantly higher in countries with a legal system that efficiently enforces private contracts. Further decomposing the interaction effect for groups of countries with different quality combinations reveals that the first of the two types of legal institutions matters for the size and direction of the interaction effect. In poor countries with absent or bad legal institutions, reforms considering only one single type can backfire.
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  • Kalkschmied, Katja, 2022. "Rebundling Institutions," VfS Annual Conference 2022 (Basel): Big Data in Economics 264064, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc22:264064
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    JEL classification:

    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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