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A new look at the effect of the determinants of government institutions: A cross-sectional analysis

  • Kalonda-Kanyama, Isaac

Many papers have found mixed results in studying the relationship between institutional quality and some of its determinants, namely openness to trade, GDP per capita and economic globalization. This paper reexamines the relationship between government institutions and these factors. The main findings in this paper is that the three factors have a threshold effect on institutional quality. Specifically, there exists a significant nonlinear relationship between three measures of government institutions (government efficiency, political stability and the rule of law) and trade. Moreover, GDP per capita has a significant nonlinear effect on government effectiveness, political stability, regulatory quality, rule of law and control of corruption. Finally, there is a significant nonlinear relationship between each of the six measures of institutional quality and globalization. Some of the findings are robust to controlling for average IQ levels and regional grouping of countries while others are not. Specifically, the results show that the nonlinear relationship was robust only two measures of institutional quality both for trade and GDP per capita. Accounting for the level of IQ revealed a significant nonlinear relationship between Voice and Accountability and both trade and GDP per capita.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 47575.

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Date of creation: Jan 2012
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Handle: RePEc:pra:mprapa:47575
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  1. Anwar Shah, 2005. "Public Services Delivery," World Bank Publications, The World Bank, number 7424.
  2. Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
  3. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  4. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  5. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc.
  6. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  7. Alberto Chong & Luisa Zanforlin, 2000. "Law tradition and institutional quality: some empirical evidence," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(8), pages 1057-1068.
  8. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
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