IDEAS home Printed from https://ideas.repec.org/p/urv/wpaper/2072-332584.html

Some searches may not work properly. We apologize for the inconvenience.

   My bibliography  Save this paper

The Joint Impact of Infrastructure and Institutions on Economic Growth

Author

Listed:
  • Zergawu, Yitagesu Zewdu
  • Walle, Yabibal M.
  • Giménez Gómez, José M. (José Manuel)

Abstract

This paper examines the joint impact of infrastructure capital and institutional quality on economic growth using a large panel data set covering 120 countries and spanning the years 1980-2015. The empirical strategy involves estimating a simple growth model where, in addition to standard controls, infrastructure, institutional quality and their interaction are included as explanatory variables. Potential endogeneity concerns are addressed by means of GMM estimators that utilize internal instruments. We findd that the interaction terms between infrastructure capital and institutional quality have a positive and significant impact on economic growth. These results are robust to a variety of alternative specifications and institutional quality measures. Hence, our results suggest that maximizing returns from infrastructure development requires improving the quality of institutions. Keywords: infrastructure; institutions; growth; dynamic panel JEL classification: H54, F20

Suggested Citation

  • Zergawu, Yitagesu Zewdu & Walle, Yabibal M. & Giménez Gómez, José M. (José Manuel), 2018. "The Joint Impact of Infrastructure and Institutions on Economic Growth," Working Papers 2072/332584, Universitat Rovira i Virgili, Department of Economics.
    • Handle: RePEc:urv:wpaper:2072/332584
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2072/332584
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ronald H. Coase, 2008. "The Institutional Structure of Production," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 2, pages 31-39, Springer.
    2. Torrisi, Gianpiero, 2009. "Infrastructures and economic performance: a critical comparison across four approaches," MPRA Paper 18688, University Library of Munich, Germany.
    3. Agnès Bénassy‐Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(5), pages 764-782, May.
    4. International Monetary Fund, 1997. "Why Worry About Corruption?," IMF Economic Issues 1997/003, International Monetary Fund.
    5. Saima Nawaz & Nasir Iqbal & Muhammad Arshad Khan, 2014. "The Impact of Institutional Quality on Economic Growth: Panel Evidence," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 53(1), pages 15-31.
    6. Flachaire, Emmanuel & García-Peñalosa, Cecilia & Konte, Maty, 2014. "Political versus economic institutions in the growth process," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 212-229.
    7. Nawaz, Saima, 2015. "Growth effects of institutions: A disaggregated analysis," Economic Modelling, Elsevier, vol. 45(C), pages 118-126.
    8. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    9. Docquier, Frédéric & Lodigiani, Elisabetta & Rapoport, Hillel & Schiff, Maurice, 2016. "Emigration and democracy," Journal of Development Economics, Elsevier, vol. 120(C), pages 209-223.
    10. Stephane Straub, 2011. "Infrastructure and Development: A Critical Appraisal of the Macro-level Literature," Journal of Development Studies, Taylor & Francis Journals, vol. 47(5), pages 683-708.
    11. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472, Elsevier.
    12. Fedderke, J.W. & Perkins, P. & Luiz, J.M., 2006. "Infrastructural investment in long-run economic growth: South Africa 1875-2001," World Development, Elsevier, vol. 34(6), pages 1037-1059, June.
    13. Sugata Ghosh & Udayan Roy, 2004. "Fiscal policy, long-run growth, and welfare in a stock-flow model of public goods," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 742-756, August.
    14. Lee, Keun & Kim, Byung-Yeon, 2009. "Both Institutions and Policies Matter but Differently for Different Income Groups of Countries: Determinants of Long-Run Economic Growth Revisited," World Development, Elsevier, vol. 37(3), pages 533-549, March.
    15. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
    16. Alicia H. Munnell, 1990. "How does public infrastructure affect regional economic performance?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 34, pages 69-112.
    17. Elisa Valeriani & Sara Peluso, 2011. "The Impact Of Institutional Quality On Economic Growth And Development: An Empirical Study," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(6), pages 1-25, October.
    18. Joseph Wright, 2008. "Do Authoritarian Institutions Constrain? How Legislatures Affect Economic Growth and Investment," American Journal of Political Science, John Wiley & Sons, vol. 52(2), pages 322-343, April.
    19. César Calderón & Enrique Moral‐Benito & Luis Servén, 2015. "Is infrastructure capital productive? A dynamic heterogeneous approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(2), pages 177-198, March.
    20. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    21. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    22. Gianpiero TORRISI, 2010. "Infrastructures And Economic Performance: A Critical Comparison Across Four Approaches," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 1(1), pages 86-96.
    23. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    24. Alberto Chong & Mark Gradstein, 2007. "Inequality and Institutions," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 454-465, August.
    25. Bhattacharyya, Sambit, 2009. "Unbundled institutions, human capital and growth," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 106-120, March.
    26. Spiros Bougheas & Panicos O. Demetriades & Theofanis P. Mamuneas, 2000. "Infrastructure, specialization, and economic growth," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(2), pages 506-522, May.
    27. Robert Gillanders, 2014. "Corruption and Infrastructure at the Country and Regional Level," Journal of Development Studies, Taylor & Francis Journals, vol. 50(6), pages 803-819, June.
    28. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    29. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
    30. David Canning & Peter Pedroni, 2008. "Infrastructure, Long‐Run Economic Growth And Causality Tests For Cointegrated Panels," Manchester School, University of Manchester, vol. 76(5), pages 504-527, September.
    31. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    32. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    33. Chang, Ha-Joon, 2011. "Reply to the comments on ‘Institutions and Economic Development: Theory, Policy and History’," Journal of Institutional Economics, Cambridge University Press, vol. 7(4), pages 595-613, December.
    34. Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-223, May.
    35. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    36. repec:hal:pseose:hal-01304133 is not listed on IDEAS
    37. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
    38. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, September.
    39. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
    40. Chang, Ha-Joon, 2011. "Institutions and economic development: theory, policy and history," Journal of Institutional Economics, Cambridge University Press, vol. 7(4), pages 473-498, December.
    41. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
    42. Dal Bo, Ernesto & Rossi, Martin A., 2007. "Corruption and inefficiency: Theory and evidence from electric utilities," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 939-962, June.
    43. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    44. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    45. John G. Fernald, 1999. "Roads to Prosperity? Assessing the Link between Public Capital and Productivity," American Economic Review, American Economic Association, vol. 89(3), pages 619-638, June.
    46. Baldwin, John R. Dixon, Jay, 2008. "Infrastructure Capital: What Is It? Where Is It? How Much of It Is There?," The Canadian Productivity Review 2008016e, Statistics Canada, Economic Analysis Division.
    47. Law, Siong Hook & Lim, Thong Cheen & Ismail, Normaz Wana, 2013. "Institutions and economic development: A Granger causality analysis of panel data evidence," Economic Systems, Elsevier, vol. 37(4), pages 610-624.
    48. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
    49. World Bank, 2017. "World Development Indicators 2017," World Bank Publications - Books, The World Bank Group, number 26447, December.
    50. Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
    51. Andonova, Veneta & Diaz-Serrano, Luis, 2009. "Political institutions and telecommunications," Journal of Development Economics, Elsevier, vol. 89(1), pages 77-83, May.
    52. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    53. Corrado, Germana & Rossetti, Fiammetta, 2018. "Public corruption: A study across regions in Italy," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1126-1139.
    54. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
    55. repec:reg:rpubli:448 is not listed on IDEAS
    56. Aron, Janine, 2000. "Growth and Institutions: A Review of the Evidence," The World Bank Research Observer, World Bank, vol. 15(1), pages 99-135, February.
    57. Maiorano, Federica & Stern, Jon, 2007. "Institutions and telecommunications infrastructure in low and middle-income countries: The case of mobile telephony," Utilities Policy, Elsevier, vol. 15(3), pages 165-181, September.
    58. Esfahani, Hadi Salehi & Ramirez, Maria Teresa, 2003. "Institutions, infrastructure, and economic growth," Journal of Development Economics, Elsevier, vol. 70(2), pages 443-477, April.
    59. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    60. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Walle, Yabibal Mulualem, 2022. "Determinants of social cohesion: Cross-country evidence," IDOS Discussion Papers 18/2022, German Institute of Development and Sustainability (IDOS).
    2. Panagiota Makrychoriti & Fotios Pasiouras & Menelaos Tasiou, 2022. "Financial stress and economic growth: The moderating role of trust," Kyklos, Wiley Blackwell, vol. 75(1), pages 48-74, February.
    3. Jinrui Zhang & Ruilian Zhang & Junzhuo Xu & Jie Wang & Guoqing Shi, 2021. "Infrastructure Investment and Regional Economic Growth: Evidence from Yangtze River Economic Zone," Land, MDPI, vol. 10(3), pages 1-14, March.
    4. John Bosco Nnyanzi & Susan Kavuma & John Sseruyange & Aisha Nanyiti, 2022. "The manufacturing output effects of infrastructure development, liberalization and governance: evidence from Sub-Saharan Africa," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 369-400, June.
    5. Pham Thai Binh & Trang Thi Thuy Nguyen, 2024. "Do institutions advocate tax simplification? Insights from a panel of 88 countries," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-39, June.
    6. Idrissa Yaya Diandy & Alioune Badara Seck, 2021. "Infrastructures physiques et croissance économique en Afrique de l'Ouest: Le rôle des institutions," African Development Review, African Development Bank, vol. 33(1), pages 154-165, March.
    7. Luigi Aldieri & Cristian Barra & Nazzareno Ruggiero & Concetto Paolo Vinci, 2023. "Corruption and firms’ efficiency: international evidence using an instrumental variable approach," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(2), pages 731-759, July.
    8. Kossi Edem Baita & Kwami Ossadzifo Wonyra, 2023. "Effet global du genre dans le développement des chaînes de valeur mondiales dans le contexte africain," African Development Review, African Development Bank, vol. 35(4), pages 365-375, December.
    9. Finocchiaro Castro ,Massimo & Guccio, Calogero, 2023. "New wine in old bottle: Exploring the Corruption-inefficiency nexus using endogenous stochastic frontier approach," EconStor Preprints 275730, ZBW - Leibniz Information Centre for Economics.
    10. Pradhan, Rudra P. & Bennett, Sara E. & Nair, Mahendhiran S. & Arvin, Mak B., 2023. "Does foreign aid procurement in resource-rich countries depend on these countries’ financial development and institutional quality? Evidence from PVECM and quantile-on-quantile regression," Socio-Economic Planning Sciences, Elsevier, vol. 88(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Saima Nawaz & M. Idrees Khawaja, 2016. "Fiscal Policy, Institutions And Growth: New Insights," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1251-1278, December.
    2. Slesman, Ly & Baharumshah, Ahmad Zubaidi & Ra'ees, Wahabuddin, 2015. "Institutional infrastructure and economic growth in member countries of the Organization of Islamic Cooperation (OIC)," Economic Modelling, Elsevier, vol. 51(C), pages 214-226.
    3. Eric Akobeng, 2017. "Gross Capital Formation, Institutions and Poverty in Sub-Saharan Africa," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 20(2), pages 136-164, April.
    4. Nawaz, Saima, 2015. "Growth effects of institutions: A disaggregated analysis," Economic Modelling, Elsevier, vol. 45(C), pages 118-126.
    5. Bayraktar-Sağlam, Bahar & Yetkiner, Hakan, 2014. "A Romerian contribution to the empirics of economic growth," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 257-272.
    6. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    7. Aisen, Ari & Veiga, Francisco José, 2013. "How does political instability affect economic growth?," European Journal of Political Economy, Elsevier, vol. 29(C), pages 151-167.
    8. Alali, Walid Y., 2010. "Impact of Institutions and Policy on Economic Growth: Empirical Evidence," MPRA Paper 115610, University Library of Munich, Germany.
    9. Daniel Oto Peralías & Daniel Oto-Peralías & Diego Romero-Ávila, 2012. "Tracing the Link between Government Size and Growth: The Role of Public Sector Quality," EcoMod2012 4015, EcoMod.
    10. Piergiuseppe Fortunato & Ugo Panizza, 2015. "Democracy, education and the quality of government," Journal of Economic Growth, Springer, vol. 20(4), pages 333-363, December.
    11. Alali, Walid Y., 2010. "Impact of Institutions and Policy on Economic Growth: Empirical Evidence," EconStor Preprints 269878, ZBW - Leibniz Information Centre for Economics.
    12. Ahmad, Mahyudin & Hall, Stephen G., 2012. "Do institutions matter for growth? Evidence from East Asian countries," MPRA Paper 42158, University Library of Munich, Germany.
    13. Aribah Aslam & Amjad Naveed & Ghulam Shabbir, 2021. "Is it an institution, digital or social inclusion that matters for inclusive growth? A panel data analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 55(1), pages 333-355, February.
    14. Puruweti Siyakiya, 2017. "The Impact of Institutional Quality on Economic Performance: An Empirical Study of European Union 28 and Prospective Member Countries," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 3(2), pages 3-24, December.
    15. Law, Siong Hook & Kutan, Ali M. & Naseem, N.A.M., 2018. "The role of institutions in finance curse: Evidence from international data," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 174-191.
    16. Kluge, Jan & Lappoehn, Sarah & Plank, Kerstin, 2020. "The Determinants of Economic Competitiveness," IHS Working Paper Series 24, Institute for Advanced Studies.
    17. Angeles, Luis, 2010. "Institutions and Economic Development. New tests and new doubts," SIRE Discussion Papers 2010-75, Scottish Institute for Research in Economics (SIRE).
    18. W. A. Naudé, 2004. "The effects of policy, institutions and geography on economic growth in Africa: an econometric study based on cross-section and panel data," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(6), pages 821-849.
    19. Eftimoski, Dimitar, 2022. "On the inconclusive effect of human capital on growth: A new look at extended specifications," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 708-727.
    20. Docquier, Frédéric & Lodigiani, Elisabetta & Rapoport, Hillel & Schiff, Maurice, 2016. "Emigration and democracy," Journal of Development Economics, Elsevier, vol. 120(C), pages 209-223.

    More about this item

    Keywords

    Infraestructura (Economia); Economia internacional; 33 - Economia;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • F20 - International Economics - - International Factor Movements and International Business - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:urv:wpaper:2072/332584. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ariadna Casals (email available below). General contact details of provider: https://edirc.repec.org/data/deurves.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.