IDEAS home Printed from https://ideas.repec.org/a/eee/deveco/v101y2013icp297-315.html
   My bibliography  Save this article

Spatial spillovers in the development of institutions

Author

Listed:
  • Kelejian, Harry H.
  • Murrell, Peter
  • Shepotylo, Oleksandr

Abstract

We examine spatial spillovers in institutional development. Dependent variables are institutional measures reflecting politics, law, and governmental administration. The explanatory variable of interest is the level of institutions in bordering countries—a spatial lag of the dependent variable. Our spatial model directly leads to the identification strategy for the endogenous spatial lag. We implement new results in spatial econometrics to counter missing-data problems usually rife in spatial empirics. Spatial institutional spillovers are statistically significant and economically important. A counter-factual exercise – the non-existence of the USSR – reveals large direct and indirect spillovers. Numerous robustness exercises bolster conclusions, including yearly cross-section regressions, fixed effects estimates, and adding many extra explanatory variables. Moreover, we provide a new theoretical result showing the robustness of estimates in the presence of omitted variables. We extend the core model, allowing different effects for better and worse neighbors, using inverse distance weights, estimating the spatial-Durbin model, and using Polity's institutional measure.

Suggested Citation

  • Kelejian, Harry H. & Murrell, Peter & Shepotylo, Oleksandr, 2013. "Spatial spillovers in the development of institutions," Journal of Development Economics, Elsevier, vol. 101(C), pages 297-315.
  • Handle: RePEc:eee:deveco:v:101:y:2013:i:c:p:297-315
    DOI: 10.1016/j.jdeveco.2012.12.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304387812001058
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sharun W. Mukand & Dani Rodrik, 2005. "In Search of the Holy Grail: Policy Convergence, Experimentation, and Economic Performance," American Economic Review, American Economic Association, vol. 95(1), pages 374-383, March.
    2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    3. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-533, May.
    4. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    5. Kelejian, Harry H. & Prucha, Ingmar R., 2004. "Estimation of simultaneous systems of spatially interrelated cross sectional equations," Journal of Econometrics, Elsevier, vol. 118(1-2), pages 27-50.
    6. Grajzl Peter & Dimitrova-Grajzl Valentina, 2009. "The Choice in the Lawmaking Process: Legal Transplants vs. Indigenous Law," Review of Law & Economics, De Gruyter, vol. 5(1), pages 615-660, November.
    7. Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio & Wacziarg, Romain, 2003. "Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-194, June.
    8. Bryan S. Graham, 2008. "Identifying Social Interactions Through Conditional Variance Restrictions," Econometrica, Econometric Society, vol. 76(3), pages 643-660, May.
    9. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    10. Alessandra Casella & Jonathan S. Feinstein, 2002. "Public Goods in Trade on the Formation of Markets and Jurisdictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 437-462, May.
    11. Harry Kelejian & Ingmar Prucha, 2010. "Spatial models with spatially lagged dependent variables and incomplete data," Journal of Geographical Systems, Springer, vol. 12(3), pages 241-257, September.
    12. Ahmed Mushfiq Mobarak, 2005. "Democracy, Volatility, and Economic Development," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 348-361, May.
    13. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
    14. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, September.
    15. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
    16. Antonio Spilimbergo, 2009. "Democracy and Foreign Education," American Economic Review, American Economic Association, vol. 99(1), pages 528-543, March.
    17. Barry Eichengreen & David Leblang, 2008. "Democracy And Globalization," Economics and Politics, Wiley Blackwell, vol. 20(3), pages 289-334, November.
    18. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    19. repec:wbk:wbpubs:12425 is not listed on IDEAS
    20. Qian, Yingyi & Roland, Gerard, 1998. "Federalism and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 88(5), pages 1143-1162, December.
    21. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    22. Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
    23. Baltagi, Badi H. & Song, Seuck Heun & Koh, Won, 2003. "Testing panel data regression models with spatial error correlation," Journal of Econometrics, Elsevier, vol. 117(1), pages 123-150, November.
    24. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    25. Nicholas Crafts & Anthony Venables, 2003. "Globalization in History.A Geographical Perspective," NBER Chapters,in: Globalization in Historical Perspective, pages 323-370 National Bureau of Economic Research, Inc.
    26. John Luke Gallup & Jeffrey D. Sachs & Andrew Mellinger, 1999. "Geography and Economic Development," CID Working Papers 01A, Center for International Development at Harvard University.
    27. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    28. Harry Kelejian & George Tavlas & George Hondroyiannis, 2006. "A Spatial Modelling Approach to Contagion Among Emerging Economies," Open Economies Review, Springer, vol. 17(4), pages 423-441, December.
    29. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    30. Jan Mutl & Michael Pfaffermayr, 2011. "The Hausman test in a Cliff and Ord panel model," Econometrics Journal, Royal Economic Society, vol. 14, pages 48-76, February.
    31. John Luke Gallup & Jeffrey D. Sachs & Andrew Mellinger, 1999. "Geography and Economic Development," CID Working Papers 1, Center for International Development at Harvard University.
    32. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
    33. Kelejian, Harry H & Prucha, Ingmar R, 1998. "A Generalized Spatial Two-Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 99-121, July.
    34. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    35. Harry Seldadyo & J. Paul Elhorst & Jakob De Haan, 2010. "Geography and governance: Does space matter?," Papers in Regional Science, Wiley Blackwell, vol. 89(3), pages 625-640, August.
    36. repec:hrv:faseco:30747160 is not listed on IDEAS
    37. Berkowitz, Daniel & Pistor, Katharina & Richard, Jean-Francois, 2003. "Economic development, legality, and the transplant effect," European Economic Review, Elsevier, vol. 47(1), pages 165-195, February.
    38. H. Kelejian, Harry & Prucha, Ingmar R., 2001. "On the asymptotic distribution of the Moran I test statistic with applications," Journal of Econometrics, Elsevier, vol. 104(2), pages 219-257, September.
    39. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
    40. James Lesage & Manfred Fischer, 2008. "Spatial Growth Regressions: Model Specification, Estimation and Interpretation," Spatial Economic Analysis, Taylor & Francis Journals, vol. 3(3), pages 275-304.
    41. J. Barkley Rosser, 2009. "Introduction," Chapters,in: Handbook of Research on Complexity, chapter 1 Edward Elgar Publishing.
    42. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, December.
    43. repec:cup:apsrev:v:98:y:2004:i:01:p:171-189_00 is not listed on IDEAS
    44. Douglass C. North & Robert Paul Thomas, 1970. "An Economic Theory of the Growth of the Western World," Economic History Review, Economic History Society, vol. 23(1), pages 1-17, April.
    45. World Bank, 2005. "World Development Indicators 2005," World Bank Publications, The World Bank, number 12426, November.
    46. Murrell, Peter & Dunn, Karen Turner & Korsun, Georges, 1996. "The Culture of Policy-Making in the Transition from Socialism: Price Policy in Mongolia," Economic Development and Cultural Change, University of Chicago Press, vol. 45(1), pages 175-194, October.
    47. Gallup, J.L. & Sachs, J.D. & Mullinger, A., 1999. "Geography and Economic Development," Papers 1, Chicago - Graduate School of Business.
    48. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1999. "Geography and Economic Development," International Regional Science Review, , vol. 22(2), pages 179-232, August.
    49. Daniel Kaufmann & Aart Kraay, 2002. "Growth without Governance," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2002), pages 169-230, August.
    50. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    51. Easterly, William & Levine, Ross, 1998. "Troubles with the Neighbours: Africa's Problem, Africa's Opportunity," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 7(1), pages 120-142, March.
    52. Alberto Chong & Luisa Zanforlin, 2000. "Law tradition and institutional quality: some empirical evidence," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(8), pages 1057-1068.
    53. Lung-fei Lee, 2003. "Best Spatial Two-Stage Least Squares Estimators for a Spatial Autoregressive Model with Autoregressive Disturbances," Econometric Reviews, Taylor & Francis Journals, vol. 22(4), pages 307-335.
    54. Lung-Fei Lee, 2004. "Asymptotic Distributions of Quasi-Maximum Likelihood Estimators for Spatial Autoregressive Models," Econometrica, Econometric Society, vol. 72(6), pages 1899-1925, November.
    55. Maarten Bosker & Harry Garretsen, 2009. "Economic development and the geography of institutions," Journal of Economic Geography, Oxford University Press, vol. 9(3), pages 295-328, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Institutions; Spatial econometrics; Governance; Neighborhood effects; Spatial spillovers;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • P5 - Economic Systems - - Comparative Economic Systems

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:101:y:2013:i:c:p:297-315. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/devec .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.