Institutions and growth: Testing the spatial effect using weight matrix based on the institutional distance concept

Mahyudin Ahmad and Stephen Hall

MPRA Paper from University Library of Munich, Germany

Abstract: This study augments a standard growth model with institutional controls, and models the spatial dependence using geographical and institutional weight matrices. Spatial Durbin model is shown to be the most appropriate to describe the data and political institutions weight matrix best explains the institutional distance concept since it produces identical results to the exogenous geographical-based distance matrix. Overall, the findings give evidence to the institutional quality effects, particularly the security of property rights, on economic growth in the developing countries. We also find evidence of an indirect route of institutions spillover where institutions in a country lead to economic improvement in that country and generate positive effects on the neighbouring countries’ income growth. Furthermore, our study is able to show that countries with similar political institutional settings have an increased spatial dependence and converge to a similar level of growth.

Keywords: Growth; institutions; spillover effects; institutional distance; spatial Durbin model (search for similar items in EconPapers)
JEL-codes: C21 O43 R10 (search for similar items in EconPapers)
Date: 2012-07-19
New Economics Papers: this item is included in nep-fdg, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:42294

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