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The joint impact of infrastructure and institutions on economic growth

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  • Zergawu, Yitagesu Zewdu
  • Walle, Yabibal M.
  • Giménez-Gómez, José-Manuel

Abstract

This paper examines the joint impact of infrastructure capital and institutional quality on economic growth using a large panel dataset covering 99 countries and spanning the years 1980–2015. The empirical strategy involves estimating a simple growth model where, in addition to standard controls, infrastructure, institutional quality, and their interaction are included as explanatory variables. Potential endogeneity concerns are addressed by employing generalized method of moments estimators that utilize internal instruments. We find that the interaction terms between infrastructure capital and institutional quality show a positive and significant impact on economic growth. These results are robust to a variety of alternative specifications and institutional quality measures. Hence, our results suggest that maximizing returns from infrastructure capital requires improving the quality of institutions.

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  • Zergawu, Yitagesu Zewdu & Walle, Yabibal M. & Giménez-Gómez, José-Manuel, 2020. "The joint impact of infrastructure and institutions on economic growth," Journal of Institutional Economics, Cambridge University Press, vol. 16(4), pages 481-502, August.
    • Handle: RePEc:cup:jinsec:v:16:y:2020:i:4:p:481-502_8
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    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • F20 - International Economics - - International Factor Movements and International Business - - - General

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