Institutions and growth: A GMM/IV Panel VAR approach

Carlos Góes

Economics Letters, 2016, vol. 138, issue C, 85-91

Abstract: Both sides of the institutions and growth debate have resorted largely to microeconometric techniques in testing hypotheses. In this paper, I build a panel structural vector autoregression (SVAR) model for a short panel of 119 countries over 10 years and find support for the institutions hypothesis. Controlling for individual fixed effects, I find that exogenous shocks to a proxy for institutional quality have a positive and statistically significant effect on GDP per capita. On average, a 1% shock in institutional quality leads to a peak 1.7% increase in GDP per capita after six years. Results are robust to using a different proxy for institutional quality. There are different dynamics for advanced economies and developing countries. This suggests diminishing returns to institutional quality improvements.

Keywords: Institutions; Panel VAR; Economic development (search for similar items in EconPapers)
JEL-codes: C14 C33 O43 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Institutions and Growth: a GMM/IV Panel VAR Approach (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:138:y:2016:i:c:p:85-91

DOI: 10.1016/j.econlet.2015.11.024

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