Institutional Infrastructure and Economic Performance: Dynamic Panel Data Evidence |
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Authors: | Siong Hook Law A N Bany-Ariffin |
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Institution: | (1) Department of Economics, Faculty of Economics and Management, University Putra Malaysia, Selangor, Malaysia;(2) Department of Accounting and Finance, Faculty of Economics and Management, University Putra Malaysia, Selangor, Malaysia |
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Abstract: | This paper attempts to empirically investigate the link between institutional quality and economic performance in a group
of 72 countries during 1980–2001, using dynamic panel data analysis. Five institutional indicators that represent the overall
institutional infrastructures of an economy are employed, namely corruption, rule of law, bureaucracy, repudiation of contracts
and risk of expropriation. The empirical results demonstrate that institutions’ variables are statistically significant determinants
of economic performance. The findings also suggest that the effects of institutional quality vary according to the level of
economic development, where institutions are more responsive in the low-income and middle-income countries. In terms of specific
effect of institutional development, the results reveal that the higher level of rule of law is most potent in delivering
long-run economic benefits. |
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Keywords: | |
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