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Extractive institutions in non-tradeable industries

Enrico Vanino () and Stevan Lee

Economics Letters, 2018, vol. 170, issue C, 10-13

Abstract: We are interested in the hypothesis that in order to promote export competitiveness and create jobs, it is necessary to address major distortions to prices in the non-tradeable sector. Exports drive growth in developing countries, yet most employment growth is generated in non-tradeable sectors. We contribute to the previous literature by explaining how non-tradeable sectors are particularly vulnerable to distortions arising from extractive and poor quality institutions. We estimate an IV-GMM model on a sample of low-middle income countries, finding evidence of a strong relationship between the growth of non-tradeable prices and the quality of local institutions. Overlooking the distortions in non-tradeable sectors could limit the analysis of constraints to economic growth and transformation in developing countries.

Keywords: Non-tradeable; Institutional quality; Extractive institutions; Economic development (search for similar items in EconPapers)
JEL-codes: D2 D4 H1 L1 L5 L8 O1 (search for similar items in EconPapers)
Date: 2018
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