Institutions and economic growth in comparative perspectives

Prime, Karla (2019) Institutions and economic growth in comparative perspectives. Doctoral thesis, Northumbria University.

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Abstract

Differences in cross-country economic performance have been attributed to differences in the quantity and quality of capital and labour stocks over time and space and cross- country differences in the productivity of these factors. Furthermore, institutional infrastructures have been considered deep determinants of the allocation and productivity of the factors of production. Despite the persistently low economic performance of middle- and low-income economies, there is a paucity of research into the dynamics of the relationship between institutions, productivity and economic performance in middle- and low-income economies. There is much research on these relationships among advanced and OECD economies, but no clear perspective of the dynamics of these relationships in middle- and low-income economies. This thesis extends the discussion of the relationship between institutions as deep determinants, productivity and the factors of production and their influence on long-run economic performance in middle- and low-income economies.

This thesis takes a positivist-deductivist approach. A representative sample of 17 developing economies for which relevant data is publicly available is used to test for the fixed and random effect of institutions and productivity on long-run economic performance. Using growth-accounting, this thesis decomposes aggregate output to calculate national levels of productivity, measured as TFP . Then using factor analysis, publicly available data is used to calculate an aggregate institutional index and four institutional factors. Using fixed and random effects models, this thesis tests for the influence of the aggregate institutional index and four institutional factors on levels of TFP capital and labour stock.

There is evidence that in the long run, levels of TFP drive how efficiently and intensely the factors of input are converted in the production process in the sample of 17 developing economies. The results suggest that cross-country differences in economic performance amongst these developing economies may be due to differences in TFP. Further that in the long run, institutions indirectly affect economic performance in these 17 developing economies through their direct influence on levels of TFP. Levels of TFP are directly influenced by the quality of national institutions, thereby impacting the efficiency and intensity of converting labour and capital stocks in the production process.

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