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Deep determinants of economic growth – empirical verification with panel data models

Author

Listed:
  • Tomasz Brodzicki

    () (Faculty of Economics, University of Gdansk)

  • Dorota Ciolek

    () (Faculty of Management, Department of Econometrics, University of Gdansk)

Abstract

We verify the impact of the so-called deep determinants on the level of economic real GDP per capita for an unbalanced panel of 207 economies within the period 1996-2004 using the Hausman-Taylor method of estimation. Institutional variables are detected to be endogenous. The results confirmed the assumed impact of deep determinants on the observed disparities in economic development. In most cases the basic specification of the model suggested by the empirical literature (log of openness, rule of law, distance from equator) is statistically significant and the impact of the variables has the anticipated direction. Several other specifications are tested and they perform pretty well. As the distance from equator has been detected not to be statistically insignificant in several specifications (for Asia and Europe) a combination of exogenous geographical variables enters the model with positive results. The basic specification of the model fits well the context of Africa and South America. It however performs badly for Asia. The quality of institutions is of prime importance for southern hemisphere economies as well as for former (currently economies in transition) and current socialist economies. The permanent improvement in the quality of institutions is the key determinant of success of economic transformation – underperformance in this area leads to smaller gains in terms of GDP per capita levels attained.

Suggested Citation

  • Tomasz Brodzicki & Dorota Ciolek, 2008. "Deep determinants of economic growth – empirical verification with panel data models," Working Papers of Economics of European Integration Division 0801, The Univeristy of Gdansk, Faculty of Economics, Economics of European Integration Division, revised Nov 2016.
  • Handle: RePEc:gda:wpaper:0801
    as

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    File URL: http://gnu.univ.gda.pl/~keie/aio12.pdf
    File Function: Second English version, 2016
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    References listed on IDEAS

    as
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    Keywords

    economic growth; economic development; institutions; geography; openness; panel data models; Hausman-Taylor estimator;

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