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Institutional quality and economic growth: Maintenance of the rule of law or democratic institutions, or both?

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  • Butkiewicz, James L.
  • Yanikkaya, Halit

Abstract

Analysis of the factors determining rates of economic growth has found that country-specific characteristics have important effects on growth performance. Empirical evidence to date suggests that maintenance of the rule of law promotes growth, while adopting democratic institutions does not appear to improve growth performance. We find that these conclusions are very sensitive to sample selection and to estimation technique. When an identical sample of countries is used, we find that countries with democratic institutions do enjoy superior growth performance. The relationship between growth and democratic institutions is also sensitive to the estimation technique used. Estimates using instrumental variable techniques suggest that democratic institutions do experience better growth performance. These results are especially relevant for developing nations. Length pages: 25 pages
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  • Butkiewicz, James L. & Yanikkaya, Halit, 2006. "Institutional quality and economic growth: Maintenance of the rule of law or democratic institutions, or both?," Economic Modelling, Elsevier, vol. 23(4), pages 648-661, July.
  • Handle: RePEc:eee:ecmode:v:23:y:2006:i:4:p:648-661
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    Cited by:

    1. Ratbek Dzhumashev, 2014. "The Two-Way Relationship Between Government Spending And Corruption And Its Effects On Economic Growth," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 403-419, April.
    2. Saha, Shrabani & Zhang, Zhaoyong, 2017. "Democracy-growth nexus and its interaction effect on human development: A cross-national analysis," Economic Modelling, Elsevier, vol. 63(C), pages 304-310.
    3. Niclas Berggren & Mikael Elinder, 2012. "Is tolerance good or bad for growth?," Public Choice, Springer, vol. 150(1), pages 283-308, January.
    4. Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2011. "Does democracy facilitate economic growth or does economic growth facilitate democracy? An empirical study of Sub-Saharan Africa," Economic Modelling, Elsevier, vol. 28(3), pages 900-910, May.
    5. Dyah Setyaningrum, 2017. "E-Government as an Anti-Corruption Tool: Experience from Indonesia," GATR Journals afr149, Global Academy of Training and Research (GATR) Enterprise.
    6. repec:hal:journl:halshs-00825816 is not listed on IDEAS
    7. Berggren, Niclas & Bergh, Andreas & Bjørnskov, Christian, 2012. "The growth effects of institutional instability," Journal of Institutional Economics, Cambridge University Press, vol. 8(02), pages 187-224, June.
    8. Constantinos Alexiou & Persefoni Tsaliki & Hashim Rasha Osman, 2014. "Institutional Quality And Economic Growth: Empirical Evidence From The Sudanese Economy," Economic Annals, Faculty of Economics, University of Belgrade, vol. 59(203), pages 119-138, October –.
    9. Castiglione, Concetta & Infante, Davide & Smirnova, Janna, 2012. "Rule of law and its implications for the environmental taxation-income path across European Countries," MPRA Paper 39433, University Library of Munich, Germany.
    10. Aurore Gary & Mathilde Maurel, 2013. "The effect of donors' policy coherence on growth," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00825816, HAL.
    11. Rasha Hashim Osman & Constantinos Alexiou & Persefoni Tsaliki, 2012. "The role of institutions in economic development: Evidence from 27 Sub-Saharan African countries," International Journal of Social Economics, Emerald Group Publishing, vol. 39(2), pages 142-160, January.
    12. Law, Siong Hook & Lim, Thong Cheen & Ismail, Normaz Wana, 2013. "Institutions and economic development: A Granger causality analysis of panel data evidence," Economic Systems, Elsevier, vol. 37(4), pages 610-624.
    13. Ugur, Mehmet & Dasgupta, Nandini, 2011. "Corruption and economic growth: A meta-analysis of the evidence on low-income countries and beyond," MPRA Paper 31226, University Library of Munich, Germany, revised 31 May 2011.
    14. Jordaan, Jacob A. & Dima, Bogdan & Goleț, Ionuț, 2016. "Do societal values influence financial development? New evidence on the effects of post materialism and institutions on stock markets," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PA), pages 197-216.
    15. Feng Wei & Yu Kong, 2014. "Government Governance, Legal Environment and Sustainable Economic Development," Sustainability, MDPI, Open Access Journal, vol. 6(4), pages 1-16, April.
    16. repec:pid:journl:v:55:y:2016:i:4:p:675-688 is not listed on IDEAS
    17. Concetta Castiglione & Davide Infante & Janna Smirnova, 2014. "Is There Any Evidence on the Existence of an Environmental Taxation Kuznets Curve? The Case of European Countries under Their Rule of Law Enforcement," Sustainability, MDPI, Open Access Journal, vol. 6(10), pages 1-21, October.
    18. Cingolani, Luciana & Crombrugghe, Denis de, 2012. "Techniques for dealing with reverse causality between institutions and economic performance," MERIT Working Papers 034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    19. Khemraj, Tarron, 2013. "Bi-communalism and the economic origins of democracy: a case study," MPRA Paper 47288, University Library of Munich, Germany.
    20. repec:eco:journ1:2017-03-60 is not listed on IDEAS
    21. Dzhumashev, Ratbek, 2014. "Corruption and growth: The role of governance, public spending, and economic development," Economic Modelling, Elsevier, vol. 37(C), pages 202-215.
    22. Chien-Chiang Lee & Chi-Chuan Lee & Chun-Ping Chang, 2015. "Globalization, Economic Growth and Institutional Development in China," Global Economic Review, Taylor & Francis Journals, vol. 44(1), pages 31-63, March.

    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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