Institutional Reforms and Their Impact on Economic Growth and Investment in Developing Countries

Jin Zhao, Ghulam Rasool Madni, Muhammad Awais Anwar and Syeda Masooma Zahra
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Jin Zhao: School of Finance, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China
Ghulam Rasool Madni: Department of Economics and Business Administration, Lower Mall Campus, University of Education, Lahore 54000, Pakistan
Muhammad Awais Anwar: Department of Economics and Business Administration, Lower Mall Campus, University of Education, Lahore 54000, Pakistan
Syeda Masooma Zahra: MPhil Graduate from Department of Economics, The University of Lahore, Lahore 54590, Pakistan

Sustainability, 2021, vol. 13, issue 9, 1-14

Abstract: It is widely accepted that the economic and social system may be more efficient by reforming institutions. Institutional reforms are attempts to change the rules affecting human interactions and these reforms are fundamental for development and economic prosperity. The reforms can be divided into two categories; political and economic institutional reforms. It is need of the hour to determine the category of reform that is more suitable for developing countries. Moreover, a vast literature describes the impact of institutional reforms but little focused on exploring their impacts on macroeconomic activities. So, this study is an effort to determine the impact of institutional reforms on macroeconomic variables by considering the panel data of 122 developing countries covering the time span from 1996 to 2019. The study applied treatment analysis using the difference-in-differences technique to gauge the effects of reforms. Besides, it will be interesting to know the causes triggering the institutional reforms in developing countries. The findings of the study reveal that economic reforms are more important as compared with political reforms to grow the economies. The countries focusing on political reforms are not able to overcome the economic crisis. Moreover, both types of reforms do not cause each other in these countries.

Keywords: political institutional reforms; economic institutional reforms; difference in differences; economic growth; investment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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