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Institutional development, transaction costs and economic growth: evidence from a cross-country investigation

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  • KOVAÄŒ, MITJA
  • SPRUK, ROK

Abstract

This paper seeks to quantify the impact of transaction costs on cross-country economic growth. Our evidence from a cross-country panel data regression analysis reveals a persistent and robust negative effect of increasing transaction costs on the path of economic growth. The growth-enhancing effects of lower transaction costs are confirmed after controlling for the set of conditioning variables and further demonstrated in a cross-country growth model calibration. The results provide evidence that transaction costs might indeed be central to the study of cross-country productivity differences, suggest the importance of contractual relations and indicate their significant impact on cross-country economic performance over time.

Suggested Citation

  • Kovaäœ, Mitja & Spruk, Rok, 2016. "Institutional development, transaction costs and economic growth: evidence from a cross-country investigation," Journal of Institutional Economics, Cambridge University Press, vol. 12(1), pages 129-159, March.
    • Handle: RePEc:cup:jinsec:v:12:y:2016:i:01:p:129-159_00
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    Cited by:

    1. Rok Spruk & Mitja Kovac, 2019. "Transaction costs and economic growth under common legal system: State‐level evidence from Mexico," Economics and Politics, Wiley Blackwell, vol. 31(2), pages 240-292, July.
    2. Pitlik, Hans & Rode, Martin, 2017. "Individualistic values, institutional trust, and interventionist attitudes," Journal of Institutional Economics, Cambridge University Press, vol. 13(3), pages 575-598, September.
    3. Mitja Kovač, 2020. "Judgement-Proof Robots and Artificial Intelligence," Springer Books, Springer, number 978-3-030-53644-2, March.
    4. Tamer Cetin & Yildirim B. Cicen & Kadir Y. Eryigit, 2016. "Do Institutions Matter for Economic Performance? Theoretical Insights and Evidence from Turkey," Koç University-TUSIAD Economic Research Forum Working Papers 1610, Koc University-TUSIAD Economic Research Forum.
    5. Sen, Kunal & Sinha, Chaitali, 2017. "The location choice of US foreign direct investment: how do institutions matter?," Journal of Institutional Economics, Cambridge University Press, vol. 13(2), pages 401-420, June.

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