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Does investment spur growth everywhere? Not where institutions are weak

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  • Thibaut Dort
  • Pierre-Guillaume Méon
  • Khalid Sekkat

Abstract

We investigate the impact of investment on growth in a sample of developed and developing countries, conditioning the marginal effect of investment on institutional quality. The panel structure of our dataset allows controlling for unobserved heterogeneity and dealing with the risk of endogeneity bias. In line with our expectations, we find that investment increases growth more in countries with high institutional quality than in countries with defective institutions. The results are essentially driven by government instability, corruption, and the rule of law.

Suggested Citation

  • Thibaut Dort & Pierre-Guillaume Méon & Khalid Sekkat, 2013. "Does investment spur growth everywhere? Not where institutions are weak," Working Papers CEB 13-030, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:2013/148346
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    More about this item

    Keywords

    growth; investment; institutions;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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