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

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  • KOVAČ, 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

  • Kovač, 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. Guo-Hua Cao & Jing Zhang, 2021. "Is a sustainable loop of economy and entrepreneurial ecosystem possible? a structural perspective," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(5), pages 7002-7040, May.
    2. Juan S. Mora-Sanguinetti & Javier Quintana & Isabel Soler & Rok Spruk, 2024. "The heterogenous effects of a higher volume of regulation: evidence from more than 200k Spanish norms," Journal of Regulatory Economics, Springer, vol. 65(1), pages 137-153, June.
    3. Hongxia Zhao & Hongyang Chen & Huijuan Zhao & Ying Lu & Jianhua Zhu, 2024. "What business environment element configuration can promote urban digitization development?," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(11), pages 27923-27944, November.
    4. 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.
    5. Georgieva,Dorina Peteva & Eknath,Varun & Woolcock,Michael, 2023. "Examining Business Reform Committees : Findings from a New Global Dataset," Policy Research Working Paper Series 10467, The World Bank.
    6. Hans-Bernd Schaefer & Rok Spruk, 2024. "Islamic Law, Western European Law and the Roots of Middle East's Long Divergence: a Comparative Empirical Investigation (800-1600)," Papers 2401.14435, arXiv.org, revised Mar 2024.
    7. Sinha, Chaitali & Saha, Shrabani & Vasilev, Aleksandar, 2024. "Institutional quality and US FDI outflows: Do political regimes matter?," Economic Systems, Elsevier, vol. 48(3).
    8. Juan S. Mora-Sanguinetti & Javier Quintana & Isabel Soler & Rok Spruk, 2023. "Sector-level economic effects of regulatory complexity: evidence from Spain," Working Papers 2312, Banco de España.
    9. 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.
    10. Mitja Kovač, 2020. "Judgement-Proof Robots and Artificial Intelligence," Springer Books, Springer, number 978-3-030-53644-2, July.
    11. Simon Hartmann & Rok Spruk, 2021. "Long-term effects of institutional instability," Empirical Economics, Springer, vol. 61(4), pages 2073-2112, October.
    12. Nauro Campos & Ekaterina Glebkina & Menelaos Karanasos & Panagiotis Koutroumpis, 2023. "Financial Development, Political Instability, Trade Openness and Growth in Brazil: Evidence from a New Dataset, 1890-2003," Open Economies Review, Springer, vol. 34(4), pages 831-861, September.
    13. Mulanda, Stephen Mulanda & Punt, Cecilia, 2021. "Characteristics of Zambia's agricultural sector and the role for agricultural policy: Insights from CGE modelling," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 300-312.
    14. 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.
    15. 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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