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The Relationship between Political Institutions and Economic Development: An Application on Middle Income Countries

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  • Ä°zzettin ULUSOY

Abstract

The reason for the differences in economic development between countries is mostly tried to be explained by economic factors, and the effects of institutions related to the social and political environment are ignored. For this reason, the primary aim of the study is to question the interaction of the institutional quality of the countries' social and political environment with their economic development levels. In the previous empirical analyzes on economic development, the Human Development Index (HDI) could not be used due to the lack of data, and GDP mostly represented economic development. In this study, unlike other studies HDI, which includes education and health indices as well as income, was used. The data of 76 middle-income countries between 1990 and 2016 were analyzed with second generation advanced panel data analysis techniques that take into account cross-sectional dependence and heterogeneity.According to the results, a two-way causality relationship was found between the level of accountability, the effectiveness of government interventions, the quality of political stability and private sector regulations and economic development, while a one-way causality relationship was found from economic development to corruption and the rule of law.

Suggested Citation

  • Ä°zzettin ULUSOY, 2022. "The Relationship between Political Institutions and Economic Development: An Application on Middle Income Countries," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 2.
    • Handle: RePEc:fis:journl:220210
    DOI: 10.25295/fsecon.1084374
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I20 - Health, Education, and Welfare - - Education - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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