Applying panel vector autoregression to institutions, human capital, and output

Ryan Murphy () and Colin O’Reilly
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Colin O’Reilly: Creighton University
Authors registered in the RePEc Author Service: Colin W. O'Reilly

Empirical Economics, 2019, vol. 57, issue 5, No 6, 1633-1652

Abstract: Abstract We bridge two areas of study by applying panel vector autoregression (PVAR) to human capital, political institutions, economic institutions, and economic output per capita. Institutions and human capital have competed within the scholarly literature as hypotheses explaining the origins of economic growth. Elsewhere, our measure of economic institutions, the Economic Freedom of the World index, has recently been explored extensively as a dependent variable, whereas previously it had been used as an explanatory variable. We wish to measure the interrelationships between political and economic institutions, as well as their interrelationships with economic output and human capital, in contrast to the literature which emphasizes the importance of political institutions alone. We explore these interrelationships in a PVAR model, finding that, descriptively at least, higher-quality economic institutions are associated with more output. We also find weak evidence that higher-quality political institutions are associated with less output and less education. We also find a robust positive effect of education on the quality of economic institutions. In performing this analysis, we contribute to the literature on the institutions and human capital debate, as well as to the literature on the causes of free economic institutions.

Keywords: Economic growth; Political institutions; Economic institutions; Human capital (search for similar items in EconPapers)
JEL-codes: O43 P51 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (10)

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DOI: 10.1007/s00181-018-1562-0

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