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Panel Causality Analysis of the Relationship among the Rule of Law, Technological Advances, Competitiveness, and Value-Added

Author

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  • Dogan Kesap

    (Recep Tayyip Erdogan University, Faculty of Economics and Administrative Sciences, Department of Economics, Rize, Turkiye)

  • Ali Riza Sandalcilar

    (Recep Tayyip Erdogan University, Faculty of Economics and Administrative Sciences, Department of Economics, Rize, Turkiye)

Abstract

The status of countries within the global value chain varies depending on the importance of national production capabilities in the global economy. From this perspective, there is a need for a value-added production approach that focuses on innovation and competitiveness. Technological advances and institutions are considered to play a significant role in transforming the economy towards an innovation-driven one to meet these needs. The aim of this paper is to investigate the relationship among technological advances, the rule of law as a proxy for institutions, value-added production, and competitiveness in a way that reflects crosscountry divergence. Through an analysis employed independently of countries’ existing levels of development, it will be possible to evaluate whether the factors associated with institutions and innovation can produce similar results in all circumstances and for each country. In this context, a panel causality analysis that considers cross-sectional heterogeneity is employed. The analysis shows bidirectional causality between the variables, except for value-added to the rule of law. However, the results also support the existence of cross-country divergence. These findings suggest that future policy plans should be designed to consider the multidimensional nature of country-specific factors, alongside technological advances and the rule of law, and to ensure the integration of both national and international economic objectives.

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  • Dogan Kesap & Ali Riza Sandalcilar, 2024. "Panel Causality Analysis of the Relationship among the Rule of Law, Technological Advances, Competitiveness, and Value-Added," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 73(74-1), pages 159-191., June.
    • Handle: RePEc:ist:journl:v:73:y:2024:i:1:p:159-191.
    DOI: 10.26650/ISTJECON2023-1298039
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    More about this item

    Keywords

    Technological advance; The rule of law; Competitiveness; Value-Added production JEL Classification: F10 ; P48 ; O32 ; O47;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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