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Stylized facts of governance, institutions and economic development. Exploring the institutional profiles database

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  • Verspagen, Bart

    (UNU-MERIT / MGSOG, and School of Business and Economics, Maastricht University)

Abstract

The empirical literature on economic growth agrees that institutions and governance are important determinants of long-run economic growth rates. As a stylized fact, this literature points to a strong correlation between the level of GDP per capita and the general development level of institutions and governance. However, the growth rate of GDP per capita itself, as well as other indicators that are broadly associated with the level of economic development, are generally much less strongly correlated with the level of institutional development. We document these correlations, and argue that there is a need for a broader set of stylized facts about institutions, governance and economic development, covering the broader set of economic indicators, including the growth rate itself. To find such stylized facts, we use canonical correlation analysis. We use a database on institutions and governance that has a very large number of indicators, and our analysis produces a number of aggregated measurements of institutions and governance that broadly correlate with patterns of economic development. The analysis confirms the correlation between the general level of economic development on the one hand, and institutional development on the other hand, which is the core stylized fact identified in the literature. In addition to this, our analysis points to the general attitude towards markets, and the level of financial development as specific dimensions of the institutional and governance characteristics of a country that correlate highly with specific development patterns. In particular, we find that a positive attitude towards markets combined with a low level of financial development goes together with growth rates, based on catching-up. We also find that a tendency towards market steering combined with strong financial development goes together with a high involvement in international trade (openness), combined with a low investment rate.

Suggested Citation

  • Verspagen, Bart, 2012. "Stylized facts of governance, institutions and economic development. Exploring the institutional profiles database," MERIT Working Papers 2012-036, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2012036
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    References listed on IDEAS

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    Cited by:

    1. Adegoke Ibrahim Adeleke, 2014. "Fdi-Growth Nexus In Africa: Does Governance Matter?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(1), pages 111-135, March.
    2. Szirmai, Adam, 2013. "Institutions and economic growth: Summary and synthesis," MERIT Working Papers 2013-070, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Alla Kalinina & Elena Petrova & Marina Buyanova, 2015. "Efficiency of Public Administration and Economic Growth in Russia: Empirical Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 77-90.
    4. Bhupatiraju S., 2014. "The geographic dimensions of institutions," MERIT Working Papers 2014-086, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Yelena Petrova, 2014. "Methodological Issues And Formation Principles Of Effectiveness Assessment System Of The Territory Management Taking Into Account Strategic Development Points," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(4), pages 261-271.

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    More about this item

    Keywords

    institutions; governance; economic development;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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