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What matters for growth in Europe? Institutions versus policies, quality versus instability

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  • Niclas Berggren
  • Andreas Bergh
  • Christian Bjørnskov

Abstract

We study how the quality and instability of institutions and policies affect economic growth in 35 European countries. While stability entails valuable predictability, instability can reflect reforms that offer positive long-run consequences. We construct measures of quality and instability for a panel of countries for 1984–2009. Results suggest that the quality of policy is growth-promoting. Notably, this positive effect becomes larger the more unstable policies are. The findings suggest that for European countries, the benefits of policy flexibility – due to experimentation and learning or making rent seeking more difficult – dominate the costs of reduced predictability.

Suggested Citation

  • Niclas Berggren & Andreas Bergh & Christian Bjørnskov, 2015. "What matters for growth in Europe? Institutions versus policies, quality versus instability," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 18(1), pages 69-88, January.
    • Handle: RePEc:taf:jecprf:v:18:y:2015:i:1:p:69-88
    DOI: 10.1080/17487870.2014.953159
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    Cited by:

    1. Ida Q. Nesset & Ingrid Bøgeberg & Frode Kjærland & Lars H. Molden, 2019. "How Underlying Dimensions of Political Risk Affect Excess Return in Emerging and Developed Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(1), pages 80-105, April.
    2. Chen Kong San & Lee Chin, 2023. "Impact of Public Debt on Economic Growth: A Quantile Regression Approach," South Asian Journal of Macroeconomics and Public Finance, , vol. 12(2), pages 250-278, December.
    3. Miguel Ángel Borrella-Mas & Martin Rode, 2021. "Love is blind: partisan alignment and political corruption in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(3), pages 423-451, September.
    4. Eunji Kim & Yoonhee Ha & Sangheon Kim, 2017. "Public Debt, Corruption and Sustainable Economic Growth," Sustainability, MDPI, vol. 9(3), pages 1-30, March.
    5. Pietro Previtali & Paola Cerchiello, 2018. "The Prevention of Corruption as an Unavoidable Way to Ensure Healthcare System Sustainability," Sustainability, MDPI, vol. 10(9), pages 1-14, August.
    6. Jiayu Ou & Zhiqiang Zheng & Naili Zhang, 2023. "A Study of the Effect of Trade Openness on Population Health: Empirical Evidence from China," Sustainability, MDPI, vol. 15(16), pages 1-19, August.

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