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Institutions and Economic Growth: A Systems Approach


  • Chris Doucouliagos
  • Mehmet Ulubasoglu


In a simultaneous equations with error components framework, we analyze the institutions-growth relationship. We address individual heterogeneity in cross-country production functions, and endogeneize factor inputs in order to disentangle the direct and indirect effects of institutions on growth. We find that the effects of political freedom on total factor productivity and human capital are positive and significant, but they are negative and significant on physical capital and labor force growth. Economic freedom, on the other hand, has positive and significant effects on total factor productivity, physical and human capital, and labor force growth. The total effects of both freedoms on growth are positive

Suggested Citation

  • Chris Doucouliagos & Mehmet Ulubasoglu, 2004. "Institutions and Economic Growth: A Systems Approach," Econometric Society 2004 Australasian Meetings 63, Econometric Society.
  • Handle: RePEc:ecm:ausm04:63

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    3. Nolazco Cama, Jose Luis & Bravo-Ortega, Claudio, 2015. "Instituciones, Recursos Naturales Y Sus Efectos En El Crecimiento Economico: Un Sistema De Ecuaciones Simultáneas En Panel De Datos
      [Institutions, Natural Resources And Its Impact On Economic Growt
      ," MPRA Paper 74421, University Library of Munich, Germany.
    4. Mellati, Ali, 2008. "Uncertainty and investment in private sector: An analytical argument and a review of the economy of Iran," MPRA Paper 26655, University Library of Munich, Germany.
    5. Manuela Tvaronavičiene & Virginija Grybaite & Agne Tvaronavičiene, 2009. "If institutional performance matters: Development comparisons of Lithuania, Latvia and Estonia," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 10(3), pages 271-278, June.
    6. repec:jfr:rwe111:v:7:y:2016:i:1:p:107-117 is not listed on IDEAS
    7. Vatcharin Sirimaneetham, 2006. "What drives liberal policies in developing countries?," Bristol Economics Discussion Papers 06/587, Department of Economics, University of Bristol, UK.
    8. Claude Diebolt & Tapas Mishra & Bazoumana Ouattara & Mamata Parhi, 2010. "Does democratic distance matter for cross-country growth interdependence?," Working Papers 10-12, Association Française de Cliométrie (AFC).
    9. Iheonu, Chimere & Ihedimma, Godfrey & Onwuanaku, Chigozie, 2017. "Institutional Quality and Economic Performance in West Africa," MPRA Paper 82212, University Library of Munich, Germany.
    10. repec:eee:tefoso:v:122:y:2017:i:c:p:24-33 is not listed on IDEAS

    More about this item


    Institutions; Growth; Simultaneous Equations; Error Components;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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