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Does Rule of Law Affect Economic Growth Positively?

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  • Asli Ozpolat
  • Gulsum Gunbala Guven
  • Ferda Nakipoglu Ozsoy
  • Ayse Bahar

Abstract

Efficient institutional structure resolves the uncertainties in the market and the problem of asymmetric information, and thus creates a positive exogeneity, ensures the efficient distribution of the resources and makes a positive impact on the functioning of the economy. In addition to this, especially rule of law forms the basis of the socio-economic development. In the presence of the factors such as prevention of corruption and freedom of expression, institutional structure has a significant impact on economic growth. However, there are empirical studies that state that institutional efficiency boosts economic growth in developed countries, whereas it doesn¡¯t have an impact or has a negative impact on economic growth in developing countries. For all these reasons, the impact of institutional efficiency on economic growth in developed, developing and underdeveloped countries will be analyzed in this study. In this study, the effect of institutional effectiveness on economic growth has been analyzed in both three country groups from 2002 to 2015 by using GMM. Dependent variable is GDP and the independent variables are institutional variables (rule of law, fight against corruption, voice and accountability). Based on our primitive findings we expect that developed institutions effect economic growth positively in develop countries unlike developing countries.

Suggested Citation

  • Asli Ozpolat & Gulsum Gunbala Guven & Ferda Nakipoglu Ozsoy & Ayse Bahar, 2016. "Does Rule of Law Affect Economic Growth Positively?," Research in World Economy, Research in World Economy, Sciedu Press, vol. 7(1), pages 107-117, June.
    • Handle: RePEc:jfr:rwe111:v:7:y:2016:i:1:p:107-117
    DOI: 10.5430/rwe.v7n1p107
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    References listed on IDEAS

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    5. Muhsin Ali & Karim Khan, 2020. "Volatility in Discretionary Public Spending and Economic Growth: A Cross Country Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(1), pages 45-68.
    6. Oleh Chornyi, 2019. "Futures Studies And Economic Development: An Interdisciplinary Approach," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 21-28, October.
    7. Abdulahi, Mohamued Elyas & Shu, Yang & Khan, Muhammad Asif, 2019. "Resource rents, economic growth, and the role of institutional quality: A panel threshold analysis," Resources Policy, Elsevier, vol. 61(C), pages 293-303.

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