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Preliminary conclusions on institutions and economic performance

Author

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  • Crombrugghe, Denis de

    () (School of Business and Economics, Maastricht University)

  • Farla, Kristine

    () (UNU-MERIT / MGSOG, Maastricht University)

Abstract

Using institutional indicators describing 122 countries, we conduct an exploratory study highlighting which institutional characteristics differ across countries with different levels of income and rates of growth. We describe a country's institutions by the degree of formalization of its regulations, the depersonalization of their implementation, and by the degree of control and intervention of the state. Our findings reveal that the variation in state control and intervention decreases along with countries formalization of regulations. This phenomenon may be explained by institutional convergence, by endogeneity in the data and/or by bias. In addition, we find evidence of a strong relationship between institutions and income levels; however, we find no such evidence on growth rates. We find mixed evidence for a relationship between institutions and growth volatility.

Suggested Citation

  • Crombrugghe, Denis de & Farla, Kristine, 2012. "Preliminary conclusions on institutions and economic performance," MERIT Working Papers 035, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2012035
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    File URL: https://www.merit.unu.edu/publications/wppdf/2012/wp2012-035.pdf
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    References listed on IDEAS

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    1. Avinash Dixit, 2009. "Governance Institutions and Economic Activity," American Economic Review, American Economic Association, vol. 99(1), pages 5-24, March.
    2. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2007. "Governance Matters VI: Aggregate and Individual Governance Indicators, 1996-2006," Policy Research Working Paper Series 4280, The World Bank.
    3. Huynh, Kim P. & Jacho-Chávez, David T., 2009. "Growth and governance: A nonparametric analysis," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 121-143, March.
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    Cited by:

    1. Farla, Kristine, 2012. "Institutions and credit," MERIT Working Papers 038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Bluhm, Richard & Crombrugghe, Denis de & Szirmai, Adam, 2012. "Explaining the dynamics of stagnation: An empirical examination of the North, Wallis and Weingast approach," MERIT Working Papers 040, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Verspagen, Bart, 2012. "Stylized facts of governance, institutions and economic development. Exploring the institutional profiles database," MERIT Working Papers 036, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Cingolani, Luciana & Crombrugghe, Denis de, 2012. "Techniques for dealing with reverse causality between institutions and economic performance," MERIT Working Papers 034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Cingolani, Luciana & Crombrugghe, Denis de, 2012. "Exploring the panel components of the Institutional Profiles Database (IPD)," MERIT Working Papers 037, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    Institutions; Economic performance; Growth;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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