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Are property rights institutions and financial development complements or substitutes? The case of private investment

Author

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  • Abdi Ali

    () (The University of Manchester, UK)

Abstract

This article explores whether the quality of the financial sector has an impact on the relationship between property rights institutions and private investment. Using dynamic panel techniques, we show that strong property rights promote increased private investment and that this positive effect is stronger in countries with poorer financial systems, suggesting that institutions and finance act as substitutes in their effect on investment.

Suggested Citation

  • Abdi Ali, 2013. "Are property rights institutions and financial development complements or substitutes? The case of private investment," Economics Bulletin, AccessEcon, vol. 33(2), pages 1126-1131.
  • Handle: RePEc:ebl:ecbull:eb-13-00176
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    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I2-P107.pdf
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    References listed on IDEAS

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    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003. "Institutional causes, macroeconomic symptoms: volatility, crises and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 49-123, January.
    3. Monica Escaleras & Dimitrios D. Thomakos, 2008. "Exchange Rate Uncertainty, Sociopolitical Instability and Private Investment: Empirical Evidence from Latin America," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 372-385, May.
    4. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    6. Ahlin, Christian & Pang, Jiaren, 2008. "Are financial development and corruption control substitutes in promoting growth?," Journal of Development Economics, Elsevier, vol. 86(2), pages 414-433, June.
    7. Ryan Compton & Daniel Giedeman, 2011. "Panel evidence on finance, institutions and economic growth," Applied Economics, Taylor & Francis Journals, vol. 43(25), pages 3523-3547.
    8. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
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    Citations

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    Cited by:

    1. Simplice A Asongu, 2014. "On the substitution of institutions and finance in investment," Economics Bulletin, AccessEcon, vol. 34(3), pages 1557-1574.
    2. Asongu, Simplice & Kodila-Tedika, Oasis, 2016. "Determinants of Property Rights Protection in Sub-Saharan Africa," MPRA Paper 76587, University Library of Munich, Germany, revised Nov 2016.
    3. Simplice Asongu & Oasis Kodila-Tedika, 2015. "On the Empirics of Institutions and Quality of Growth: Evidence for Developing Countries," Working Papers 15/041, African Governance and Development Institute..
    4. Simplice Asongu & Enowbi Batuo & Vanessa Tchamyou, 2015. "Bundling Governance: Finance versus Institutions in Private Investment Promotion," Working Papers 15/051, African Governance and Development Institute..

    More about this item

    Keywords

    Property rights institutions; financial development and private investment;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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