Institutions, Innovation and Economic Growth in European Countries

Giorgio d'Agostino and Margherita Scarlato

MPRA Paper from University Library of Munich, Germany

Abstract: This paper provides an empirical analysis of the linkages between the quality of government institutions and economic growth in the European context, highlighting innovation as the intermediate variable that drives this interplay. We use a standard non-scale R&D-based growth model as a theoretical framework and estimate the balanced growth path of per capita GDP for a sample of European countries and the transitional dynamic after a technological shock. Empirical analysis confirms the importance of technology as an instrument for increasing economic growth and suggests that inclusive institutions strongly affect this impact across the European countries. The magnitude of the effect is high: inclusive institutions redouble the effect of a technological shock on the growth rate of per capita GDP. This result suggests that innovation policies should carefully take into account the institutional setting of the contexts in which they are implemented in order to be effective.

Keywords: Innovation; Economic growth; Institutions (search for similar items in EconPapers)
JEL-codes: O30 O41 O43 (search for similar items in EconPapers)
Date: 2016-07-09
New Economics Papers: this item is included in nep-cse, nep-fdg, nep-ger, nep-gro, nep-ino and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72427

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