Do institutions matter for economic growth?

Mingyang Li () and Subal Kumbhakar
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Mingyang Li: Huazhong University of Science and Technology

International Review of Economics, 2022, vol. 69, issue 4, No 1, 465-485

Abstract: Abstract Using a unique dataset assembled from several sources, we examine the effects of democracy, corruption, and economic freedom on economic growth for over one hundred countries. To allow for heterogeneous effects, we use a quantile regression approach. Our results support some findings in the literature, but also provide some new conclusions. In many cases, quantile regression estimates are quite different from those from GMM. We find that the positive effect of democracy is lower for the countries with a higher growth rate of GDP per capita, which may sound counter-intuitive to conventional wisdom. Likewise, we find that corruption “sands the wheels” (“greases the wheels”) for the lowest (highest) GDP per capita growth countries. Economic freedom shows a positive effect on GDP per capita growth rate. Our results suggest that since democratic status is hard to change in the short run, certain current corruption control measures as well as economic freedom adjustment policies may be reconsidered, especially among the fastest and slowest growing countries.

Keywords: Economic growth; Corruption; Democracy; Economic freedom; Arellano and Bond estimator and Quantile regression (search for similar items in EconPapers)
JEL-codes: C21 O43 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s12232-022-00400-9

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