Preliminary conclusions on institutions and economic performance
Denis de Crombrugghe & Kristine Farla
#2012-035
Using institutional indicators describing 122 countries, we conduct an
exploratory study highlighting which institutional characteristics
differ across countries with different levels of income and rates of
growth. We describe a country's institutions by the degree of
formalization of its regulations, the depersonalization of their
implementation, and by the degree of control and intervention of the
state. Our findings reveal that the variation in state control and
intervention decreases along with countries formalization of
regulations. This phenomenon may be explained by institutional
convergence, by endogeneity in the data and/or by bias. In addition, we
find evidence of a strong relationship between institutions and income
levels; however, we find no such evidence on growth rates. We find mixed
evidence for a relationship between institutions and growth volatility.
Keywords: Institutions, Economic performance, Growth
JEL Classification: O11, O43