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Institutions and growth: Testing the spatial effect using weight matrix based on the institutional distance concept

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  • Ahmad, Mahyudin
  • Hall, Stephen G.

Abstract

This study augments a standard growth model with institutional controls, and models the spatial dependence using geographical and institutional weight matrices. Spatial Durbin model is shown to be the most appropriate to describe the data and political institutions weight matrix best explains the institutional distance concept since it produces identical results to the exogenous geographical-based distance matrix. Overall, the findings give evidence to the institutional quality effects, particularly the security of property rights, on economic growth in the developing countries. We also find evidence of an indirect route of institutions spillover where institutions in a country lead to economic improvement in that country and generate positive effects on the neighbouring countries’ income growth. Furthermore, our study is able to show that countries with similar political institutional settings have an increased spatial dependence and converge to a similar level of growth.

Suggested Citation

  • Ahmad, Mahyudin & Hall, Stephen G., 2012. "Institutions and growth: Testing the spatial effect using weight matrix based on the institutional distance concept," MPRA Paper 42294, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42294
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    File URL: https://mpra.ub.uni-muenchen.de/42294/1/MPRA_paper_42294.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ahmad, Mahyudin, 2018. "Globalization, economic growth, and spillovers: A spatial analysis," MPRA Paper 86252, University Library of Munich, Germany.
    2. repec:spr:epolit:v:34:y:2017:i:3:d:10.1007_s40888-017-0057-3 is not listed on IDEAS

    More about this item

    Keywords

    Growth; institutions; spillover effects; institutional distance; spatial Durbin model;

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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