Institutional and structural determinants of investment worldwide

Jamus Lim

Journal of Macroeconomics, 2014, vol. 41, issue C, 160-177

Abstract: This paper considers institutional and structural factors associated with investment activity in a panel of up to 129 developed and developing countries. We introduce these factors to a standard neoclassical investment function for open economies, and find that financial development and institutional quality are reasonably robust determinants of cross-country capital formation, with latter displaying more stability in the sign and significance of its coefficient. Indeed, when endogeneity concerns are addressed more explicitly using external instruments, and both interactions and subsamples are considered, institutional quality tends to survive as the causal determinant of investment.

Keywords: Cross-country investment; Financial development; Institutional quality (search for similar items in EconPapers)
JEL-codes: E02 E22 O16 O43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:41:y:2014:i:c:p:160-177

DOI: 10.1016/j.jmacro.2014.05.007

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