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The main objective of this study is to analyze the effect of institutional quality on education quality in developing countries. The literature review explores the channels through which institutional quality transits to affect education quality. The empirical analyses cover a sample of 82 developing countries. The main results obtained using ordinary least squares and two-stage least squares estimators show that institutional quality has a positive effect on student achievement and school completion, and a negative effect on educational failure. Concerning the role of transmission channels, the results show that a deterioration in institutional quality, characterized in particular by the presence of corruption, political instability, or the deterioration of government effectiveness, reduces the effectiveness of public spending on education and the quality of teaching through unethical behavior of teachers and the recruitment of untrained or less trained persons to carry out teaching tasks.

This paper examines the relationship between regulation-induced time delays and export entrepreneurship in a panel of 59 countries for the period 2006 to 2014. The paper finds robust evidence that regulations which cause lengthy time delays in moving a standard container of goods from the factory to the seaport significantly reduce export entry rate. These findings support the hypothesis that decreasing regulation-induced time delays expands export entrepreneurship by reducing the cost of exporting. Additionally, the paper finds that superior quality institutions significantly enhance the positive impact of lower regulatory time barriers on export entrepreneurship. Stronger protection of private property rights is the most important measure of institutional quality that aides the favorable impact of lower regulation-induced time barriers on export entrepreneurship. Furthermore, a reduction in regulation-induced time barriers has a positive effect on net entry rate and survival rates of export entrants, and high-quality institutions significantly increase the magnitude of this positive outcome.

open access article Using panel data of 42 countries from 2001 to 2019, we examine whether political uncertainty (caused by uncertainty about national elections) explains variations in cross-country liquidity, market size, and transaction cost. We also investigate whether institutional quality moderates the negative effects of political uncertainty on stock market development. We show that political uncertainty reduces stock market size, liquidity and increases transaction costs. Our results indicate that institutional quality moderates the negative effects of political uncertainty on stock market development. However, we find no effects in emerging markets arising from the high prevalence of weak institutions. We confirm the robustness of our findings using alternative financial development measures and endogeneity. This study enhances our understanding of the salient role of political uncertainty in the development of the stock market, with important implications for market regulators, corporations, and investors.

There are a numbser of reasons suggesting that improving institutional quality is the most vital role for nations that are experiencing or are expected to face a natural resource curse to overcome these challenges. Based on this debate, this study seeks to examine the relative impacts of different dimensions of such qualities – institutional quality (that is, index of rule of law, control of corruption, regulatory quality, political instability, voice accountability, and government effectiveness) – in MENA countries using a cross-sectional and time series data from period of 1996–2019. In the light of this, the main variable considered is effects of natural resource rents and other factors, such as human factor and financial developments on real GDP per capita. To achieve the desired result, panel model techniques was employed to estimate the results, which revealed that natural resource rents and human capital have positive and significant relationship with real GDP per capita while financial development have negative impacts, hence diminishes the economic growth of the country. Also, voice accountability and government effectiveness have negative effects on the real GDP, while the other institutional quality, except regulatory quality, have significant contribution in increasing the real GDP. The interacting effects of natural resource and voice accountability foster the economic development, and it also have impact in increasing the size of natural resources, and human capital on the economic development of MENA while at the same time vanishes the initial negative effects of financial development of the economic growth. Moreover, interaction of natural resource rent on political instability, government effectiveness, rule of law, and control of corruption have all significantly contributed to increase the economic growth of MENA while regulatory law is of no significant. Based on this, ideal policy directions were highlighted.

Numerous studies on foreign direct investment (FDI) as a prime element of capital flow and external finance contribute to foreign physical stock of capital, knowledge spillovers, transfer of technology, and recipient countries’ employment. Developing economies need FDI to boost their economic growth. This study explores the moderating role of national absorptive capacity between FDI inflow and institutional quality (control of corruption, government effectiveness, political stability and the absence of violence, regulatory quality, rule of law, voice and accountability) on a panel of 113 developing countries for 2000–2019. Hausman fixed-effect and random-effect estimation are used in the analysis. The results show that national absorptive capacity (AC) moderates the relationship between FDI inflow and institutional quality dimension. To check robustness, we formed an index of institutional quality (OIQ) dimensions through principal component analysis (PCA) and regressed, demonstrating that AC moderates the relationship between OIQ and FDI. Subsequently, taking BRICSþPakistan as a sample, we find that the results hold. This study will help form FDI-friendly policy in developing countries.

Our paper is the first attempt to examine the non-linear effects of economic complexity on the shadow economy. By applying diverse econometric techniques to a global sample of 42 low-income & lower-middle-income (LI&LMICs) and 30 upper-middle-income (UMICs) and 38 high-income (HICs) during the 2002–2017 period, our findings confirm the presence of a non-linear association between economic complexity outlook index and the shadow economy while economic complexity index has an increasingly significant and negative influence on shadow economy. Furthermore, a non-linear relationship between economic complexity and the shadow economy more likely exists either in the long run or in the high-income economy. Notably, we find that economic complexity plays a critical role in deteriorating the positive effects of uncertainty on the size of the shadow economy, while institutional quality significantly determines the effect of economic complexity.

This study explores the impacts of migrants’ remittances and institutional quality on financial development in developing countries, and further tests the hypothesis that institutional quality influences the impact of remittances on financial development. Applying an unobserved dynamic factor model to 46 countries for the period of 1996 to 2016, a composite institutional quality index is first estimated that represents national institutional quality. Using fixed- and random-effects instrumental variable (IV) estimations, evidence is then provided that demonstrates that remittances and institutional quality promote financial development, and more importantly, that institutional quality can play a significant role in enhancing the impact of remittances on financial development, especially when institutional quality attains a certain high level. These results suggest that in countries with stronger institutions, remittances are transmitted more effectively and efficiently to promote financial development than in countries with weaker institutions. Moreover, in accordance with previous literature, financial openness and trade openness are shown to be critical for financial development.

This paper provides evidence of the role that financial market development and institutional quality play in the integration of European Union (EU) life insurance markets. It analyzes ten EU life insurance markets over a seventeen-year sample period. The meta-technology cost/revenue efficiency ratios, estimated under the meta-frontier DEA framework, are used as a measure of integration and the analysis is conducted by applying Tobit panel regression models. We find that national stock market development and institutional quality enhance cost performance and integration of EU life insurance markets. Results also show that in countries where bancassurance is the main life insurance distribution channel, banking sector development contributes to integration in terms of revenue efficiency. However, we find that better outcomes in national institutional quality decrease the meta-technology revenue efficiency ratio, suggesting that life insurance prices are lower in countries with better institutions. Funding for open access charge: Universidad de Málaga / CBUA. The authors gratefully acknowledge financial support from the Spanish Ministry of Science, Innovation and Universities (Project RTI2018-097620-B-100) and Universidad de Málaga Campus de Excelencia Internacional Andalucía Tech. This paper was awarded the 2020 ‘‘Antonio Dionis Soler’’ Research Prize (accésit) by Fundación de Estudios Financieros

This study applies the method of the fully modified ordinary least squares (FMOLS) method and the vector error correction model (VECM) to explore whether institutional quality (IQ) and foreign direct investment (FDI) promoted economic growth (EG) and environmental quality (EQ) in oil-producing and non-oil-producing African countries from 1999 to 2017. The FMOLS findings demonstrate that IQ significantly promoted EG and improved EQ in the non-oil-producing countries, however it only improved EQ and showed no significant impact on EG in oil-producing countries. FDI significantly promoted EG to a higher extent in oil-producing countries than in non-oil-producing countries, but it presented no significant impact on EQ in both groups. The VECM results reveal that (i) two-way causation among IQ and EG, IQ and EQ, FDI and EG, and FDI and EQ was occurred in both groups, in the long-run. (ii) two-way causation among FDI and EQ and one-way causation from FDI to EG was observed in non-oil-producing countries in the short-run. Moreover, two-way causation among IQ and EG, and one-way causation from IQ to EQ were observed in non-oil-producing countries. To realize the sustainable development of economy and environment, a series of policy suggestions have been discussed.

This study aims to determine the relationship between financial development and economic growth with respect to the state of institutional quality in 4 North African countries over the 2000–2018 period. Using the dynamic generalized method of moments in a panel data analysis, we found that financial development has a positive effect on economic growth. Equally important, institutional quality plays a significant and positive role in economic growth. More interestingly, the study finds that institutional development is complementary to financial development. As a policy implication, we recommend that policymakers place special importance on implementing policies that result in the deepening of financial systems, including a sound institutional framework. Thus, by promoting the development of a country’s financial system, economic growth will be accelerated.

We examine the growth effects of public and private investment by using data for a large sample of countries. For the full sample, our dynamic panel estimations indicate that both public and private investment have strong positive effects on growth. Our estimations for income levels also show that the impacts of both public and private investment are positive and statistically significant for developing countries. Interestingly, public and private investment promote growth in developing countries with effective and ineffective governments. It seems that countries can significantly benefit from investment regardless of their institutional quality levels. Furthermore, the effect of public investment generally appears to be larger than that of private investment. Given the robust relationship between investment and growth in both ineffective and effective developing countries, an important policy implication of our study is that both types of investment should be encouraged to foster economic growth.

We study the role of institutional quality and insurance markets in the economic growth of middle-income countries between 2005 and 2019. Insurance market development consistently explains long- an...

Our objective is to analyze whether financial knowledge influences income inequality. For this purpose, we resort to a new index of financial knowledge that differs from the existing ones in that it is both longitudinal and macroeconomic. We use this index as one of the explanatory variables of the Net Gini Index in our panel data estimations. Based on a sample of 63 countries over the period 2008–2014, our results allow us to conclude that financial knowledge is related to income inequality and that, moreover, this relationship is non-linear. Thus, increases in financial knowledge could reduce income inequality when starting from relatively low levels of such knowledge. However, at a certain threshold, the income redistributive effect of financial knowledge could disappear or even reverse. Even so, national strategies for financial education could be useful to achieve economic equity in those countries where financial knowledge levels are low. In addition, we shed light on the effect that other variables (such as institutional quality or under-education) have on income inequality.

This article offers a meta-regression analysis of the literature on the drivers of financial development (FD). Our results based on 1,900 estimates suggest that institutional quality is positively correlated to both private sector credit and stock market capitalization (both as share of Gross Domestic Product). Domestic financial openness has a positive effect on both proxies for FD, while trade openness seems only important for stock market capitalization. Inflation has an adverse effect on FD, which is larger for stock market capitalization. Finally, we conclude that the literature has not yet robustly established that remittances matter for FD., Oxford Economic Papers, 74 (3), ISSN:0030-7653, ISSN:1464-3812

Africa has received considerable amounts of external aid over the last two decades without significant improvements in socio-economic conditions on the continent. This study, therefore, examines the effects of foreign aid on growth in Africa, and how institutional quality can moderate these effects. The study used the system generalized method of moments estimation technique and a panel of forty-two African countries over the period 2010-2018. Interestingly, the study established that even though foreign aid impacts negatively on growth in Africa, improving the quality of institutions on the continent can reverse this negative effect. In fact, the study computed a threshold value of institutional quality beyond which foreign aid would be a blessing to Africa. This implies that for foreign aid to contribute meaningfully to growth in Africa, the quality of institutions should improve beyond this threshold. Unfortunately, the average level of institutional quality in Africa is presently below this threshold. The study concluded that policymakers in Africa should take urgent steps to strengthen the quality of institutions on the continent as a means of exploiting the continent's huge foreign aid to drive growth and reduce the excruciating effects of poverty plaguing more than half of its population.

A number of studies have examined the roles of natural resources endowment on economic prosperity (or otherwise). While doing this, some researchers have identified institutions (while some others have suggested human capital) as a conduit via which natural resources endowment stimulates the economy. To lend a voice to this important policy issue, this study measures the roles of human capital and institutional quality on the nexus between natural resources endowment, FDI and economic growth in the MENA region. Based on the ARDL technique on yearly data spanning 1990–2017, our empirical estimates suggest that natural resources endowment is positively connected with growth, while human capital exerts both negative and positive effects—even though the negative effect dominates. Again, while the aggregated institutional quality produces a negative estimate, a mixed result is obtained when it is disaggregated. Moreover, FDI stimulates growth in the short-run, but not in the long-run; human capital is observed to reduce the negative effect of FDI on the growth of the MENA region by 0.01%, while institutions alter the negative FDI–growth relationship earlier obtained by 0.15%. Finally, the interaction effect of natural resources endowment and human capital on—growth is positive; a positive coefficient is equally obtained for the interactive role of natural resources endowment and institutional quality. These explain that human capital influences the growth effect of natural resources endowment by 0.01%, even as institutional quality stimulates the positive impact of natural resources endowment on economic growth by 0.23%.

This paper uses the exogenous shock generated by the COVID-19 pandemic and the relative government response as an informative case in investigating the factors able to affect policy efficacy. Lockdown measures have been widely adopted to limit the diffusion of COVID-19, indirectly supporting the capacity of the hospital system to face the pandemic. Lockdown obliges people to change their social behaviour significantly, and consequently is a matter of serious concern amongst the population. For this reason, how people react to lockdown is of the utmost importance, since failure to observe it properly will be of little benefit in reducing contagion. In this rationale, factors correlated with individuals’ behaviour could affect the efficacy of such measures. The aim of this paper is to investigate whether differences in institutional quality and social capital are correlated with the efficacy of lockdown measures, taking the Italian provinces as a case study. Using a quantitative analysis employing F-GLS estimators, our results suggest that both local social capital and institutional quality have affected the efficiency of lockdown measures in Italian provinces. In general terms these factors contribute to forming the set of incentives able to promote individual behaviour that is in closer compliance with government choices. In this perspective, institutional quality and social capital can be considered factors able to influence the efficacy of policies.

The study explores the impact of natural resource rents on internal conflicts and examines how the aforementioned relationship is influenced by institutional quality. The study is based on a panel dataset of 70 countries for the period 1991–2018. The empirical evidence shows that natural resource rent leads to an increase in internal conflict in both developed and developing countries. However, the impact of natural resource rent on internal conflict is negative in the presence of better quality of government institutions for the global sample, developed and developing countries. Hence, natural resource rent leads to a reduction in internal conflict when it is supported by better institutional quality in terms of high bureaucratic quality, rule of law and low corruption in government institutions. Overall, the study finds that natural resource rent leads to an increase in internal conflict, however, this relationship is mitigated by better institutional quality.

This study examines the impact of government payment arrears accumulation on the stability of the banking industry, taking into account the role played by institutional quality in 17 selected SSA countries. The study employed a panel threshold regression model using data from World Bank and International Monetary Fund databases between 2005 and 2018. The key finding from the analysis indicates that arrears accumulation adversely affects banking sector stability, but with institutional quality, the effect is reduced. As a result, public policy should aim at clearing arrears and improving the quality of institutions.

This paper provides evidence regarding the impact of soft information on foreign bank efficiency in the ASEAN-5 market in the years following the Asian crisis. The analysis presented here develops previous literature by disaggregating soft information into five difference types and examining whether institutional quality (proxied for by host-country economic risk stability index) mitigates the impact. Using a three-stage estimation process we find that soft information does indeed affect foreign banks’ efficiencies in an identifiable manner, but host-country institutional quality acts so as to significantly lessen the effect.

We analyse the investment-to-cash flow relationship in Europe using a sample of manufacturing small- and medium-sized enterprises (SME) over the period 2009–2016. We investigate the effect of regional institutional quality on the investment-to-cash flow sensitivity, finding that, although credit constraints remain a serious problem for European SMEs, high-quality regional institutions contribute to mitigate the dependency on internally-generated resources to finance new investments. Improvements in local institutional quality can therefore facilitate SMEs’ access to credit–e.g. through inter-firm trade credit relationships –, but are insufficient to overcome the credit restrictions faced by European SMEs.

It is commonly accepted in the economic literature that institutions influence economic development. But can we detect the effect of quality of institutions on the performance of specific economic sectors in the regions of a country? There is a significant gap in knowledge and evidence of this in the literature. Since the 1990s, India has adopted a set of reform steps to improve the efficiency of its electricity sector. However, there remain significant performance differences among the regulated network utilities. We apply a stochastic frontier analysis to examine the performance of electricity distribution utilities in 24 Indian states. Our estimated heteroscedastic cost frontier model allows us to identify determinants of performance related to state-level institutional and economic factors. The findings confirm that economic development and institutional quality positively affect the performance of electricity distribution utilities. Additionally, we simulate the potential cost savings from institutional enhancements. The results support the need to strengthen the institutions, for example, through reform and bolstering of independent regulatory agencies.

We study the interactions between institutional quality, government expenditure, tax revenue, and economic growth in low-income countries (LICs) and lower middle-income countries (LMICs) over 2005–2019. The primary distinguishing factor of the paper is the simultaneous inclusion of all these four variables in a single temporal causal model. A second distinguishing feature of the paper is its focus on LICs and LMICs and a clear distinction between short-run and long-run results. Tax revenue is considered as general revenue as well as revenue from taxes on international trade, and customs and other import duties. Our results show that institutional quality, government expenditure, tax revenue, and economic growth often have endogenous links among each other in the short run. These results are not always uniform across our samples. On the other hand, a robust and uniform result across all samples is that the three covariates are important drivers of long-term economic growth. Thus, the co-development of stronger institutions and more effective fiscal policies (relating to taxes and government expenditure) appear to be key in procuring sustained long-term economic growth of countries.

This paper examines the relationship between current account and financial development, while taking into account institutional quality in the Middle East and North Africa (MENA) region over the period 1990–2018. By applying various measures of the quality of institutions and two indices representing financial development, we found that, while most financial development indices have a significant positive effect on the current account, the coefficients of the interaction term are significantly negative. This clearly shows that institutional quality mitigates the positive effect of financial development on the current account. Our empirical results allow us to conclude that the level of financial development in a country with a high level of corruption increases the current account deficit. These results suggest that, in order to benefit from financial development, financial systems in MENA countries must be embedded within a sound institutional framework.

This article examines the impact of institutional, financial, and economic development on firms’ access to finance in Latin America and Caribbean region. Based on firm- and country-level data from the World Bank databases, we employ an ordered logit model to understand the direct and moderating role of institutional, financial, and economic development in determining firms’ financial obstacles. The results show that older, larger, facing less competition and regulation burden, foreign owned, and affiliated firms report lower obstacles to finance. Second, better macro-fundamentals help to lessen the level of obstacles substantially. Third, the role of institutions in promoting firms’ inclusive finance is quite different to the role of financial development and economic growth. JEL Classification: E02; G10; O16; P48

This paper investigates the moderating role institutional quality plays in foreign direct investment led growth hypothesis in Nigeria from 1984 to 2018 using autoregressive distributed lag estimation technique. Specifically, the study contributes to the literature by using seven different institutional indicators to moderate the effect of foreign direct investment on economic growth. The findings reveal that foreign direct investment has no direct (positive) effect on economic growth in Nigeria. However, the interactive effect of institutional indicators with foreign direct investment has significant impact on economic growth in most of the models. This implies that institutions serve as important absorptive capacity that needs to be strengthened for the country to benefit maximally from the growth effect of foreign direct investment. This study therefore concludes that good institutional quality matters for foreign direct investment and growth in Nigeria.

The paper empirically examines whether and how political institutions shape the nexus between finance and carbon dioxide (CO2) emissions. In a sample of developing and developed countries, it finds that financial development impedes green technology development and thus raises energy use and CO2 emissions, the effects that moderate with improvements in institutional quality. Despite so, there are differences between banks and stock markets, banking competition and concentration, and household and firm credit. Specifically, a more concentrated, less competitive bank-based financial system that lends more to households hinders green technology development and exaggerates energy use and CO2 emissions, and the impacts diminish when institutional quality enhances. Conversely, a more market-oriented financial system with a more competitive and less concentrated banking sector that lends more to private non-financial enterprises promotes green technology development and decreases energy use and CO2 emissions, the effects that weaken when the quality of political institutions betters.

The main goal of this paper is to empirically examine whether human capital, institutional quality, and economic development affect the relationship between export upgrading and economic growth. Different from most previous studies, which include an interaction term between export upgrading and a conditioning variable, this article applies an innovative dynamic panel threshold regression model to allow for non-linearity and an endogenous determination of the threshold location. The model is implemented using a panel data set of 56 developed and developing countries over the period of 1995–2015. Our main findings are twofold. First, the relation between export upgrading and economic growth appears to be non-linear. Second, we find evidence that export upgrading can only enhance economic growth in countries satisfying certain threshold prerequisites, regarding initial income level, human capital, and institutional quality.

This paper analyzes how institutions' quality shapes the relationship between inflation targeting and financial stability in 63 countries over the period 1990–2014. We find that targeters with poor institutions are less financially stable than non-targeters only in Emerging and Developing Countries who use little or no macroprudential policies. As these policies are implemented, this effect works in reverse or becomes nil when institutions' quality improves. Thus, our paper calls for an explicit mandate for central banks in former countries to pursue both inflation and financial stability through macroprudential instruments' moderate use.

Efforts to lower energy intensity increased initially as a result of rising fuel prices following the first and second oil shocks, which subsequently became serious owing to mounting evidence that fossil fuels are a major cause of climate change and global warming. Energy source is a key problem associated with climate change as oil and gas, and coal constitute major components of fossil fuels. However, the extant literature remains divided on the determinants of energy intensity. Hence, using panel annual data from 84 stable and unstable countries from 1980 to 2012, this paper tested the relationship between energy intensity, and trade, FDI, urbanization, industrialization, and institutional quality. FDI in particular showed a highly significant contribution towards lowering energy-intensity, as its coefficients were negative and highly significant at 1% in all three groups of countries. However, urbanization had no impact on energy-intensity levels in all three groups of countries, while industrialization and trade exacerbated energy intensity in the global panel of countries. Whereas trade showed no relationship with energy intensity among stable and unstable countries, industrialization worsened energy intensity among stable countries. Institutional quality had a highly significant (1%) and positive impact on reducing energy intensity in all three groups of countries.

This paper uses data for 53 countries from the World Values Survey in a multilevel regression analysis that seeks to disentangle individual, institutional and other-regarding factors affecting ethi...

In this study, we address the issue of whether trust enhances institutional quality. Despite accumulated research on the topic, comparative studies examining whether such a relationship holds across different regions are rare. Consequently, in this study, we focus on the heterogeneous effect of trust on the protection of property rights worldwide. According to our research, in Western democracies, owing to relatively effective legal systems, trust facilitates cooperation among citizens in utilizing public means to collectively secure properties. In contrast, in other parts of the world, owing to less effective legal systems, citizens with high levels of trust, who presumably have access to many social resources, utilize private means such as informal networks, for protecting property rights. Our empirical analysis of time-series cross-sectional data, and individual-level survey data yields evidence supporting the aforementioned assertion. Moreover, we find suggestive evidence of a causal mechanism linking trust and institutional quality.

Based on the stakeholder theory, we posit that firms’ innovation, as a strategic choice, is determined by not only firms’ resources but also their pressures from different stakeholders and relationship with the government. Using a dataset of 3,444 firms in seven ASEAN countries, we find that firms’ innovative outputs are positively influenced by export orientation and fierce competition but restrained by the presence of foreign investment. In addition, while strengthening the relationship with government facilitates, the chance to create some types of innovation, could magnify or dampen the effects of those pressures on firms’ innovation. Our findings have useful implications for the firms’ managers to accumulate and spend resources to build up a strong capacity for innovation. For the governments in ASEAN region, they should focus on improving the institutional quality and providing incentives for foreign investments that only bring advanced technologies and spillover effects.

With the virtual disappearance of tariffs, domestic export time delays have emerged as what is arguably the next most significant obstacle to trade. This may explain recent initiatives to combat delays independently of other trade transaction costs by a variety of regional and international organisations, including the WTO. Such initiatives have resulted in important reductions in export time delays in forty per cent of developing countries. In this paper, we propose a novel mechanism by which reductions in delays induce governments to respond by increasing the export fees that they charge exporters. We test this prediction empirically and use a difference gravity approach to investigate the joint impact of both delays and export fees on the flow of trade. Our results support the hypothesis of endogenous export fees which suggests that policies targeting delays in isolation are, at least ex ante, suboptimal. Our findings further show that for exporters of low‐value and time‐insensitive goods, such as many developing countries, export fees are at least as significant an impediment to exports as delays.

What makes an asset institutional quality? This paper proposes that one reason is the existing concentration of delegated investors in a market through a liquidity channel. Consistent with this intuition, it documents differences in investor composition across US cities and shows that delegated investors concentrate their investments in cities with higher turnover. It then estimates a search model showing how heterogeneity in liquidity preferences makes some markets more liquid, even when assets have identical cash flows. The paper provides evidence for clientele equilibria arising in frictional asset markets and suggests that a liquidity channel may explain divergent paths in city development.

This study aims to shed light on the capital buffer and risk adjustments in the banking sector of South-Eastern European countries following the financial crisis of 2008 that triggered a series of ...

This paper examines the determinants of foreign direct investment in the Southern Central Coast (SCC) region of Vietnam over the period 2007–2016 by a spatial econometric approach. The estimation results show that FDI inflows in the SCC region are attracted by the cheap labor cost of the host province, and provinces that own national seaports have great advantages in attracting FDI, confirming the vertical FDI form in the SCC region. Interestingly, skilled labor force in the surrounding provinces has a positive impact on FDI inflows in the host province. In particular, regarding the role of local institutional quality, the estimation shows that the legal institutions and level of social security in the host province play important roles in attracting FDI.

Studies have continued to emerge on the transmission channels through which finance influences growth. It has been argued that more finance without efficient institutions may not yield more growth. Meanwhile, studies on sub-Saharan Africa are sparse. None of existing studies have examined the moderating effect of institutions on finance–growth nexus in Southern Africa despite the weak institutions in the sub-region. Deviating from extant studies, this study contributes to general discussion by taking care of cross-sectional dependence among countries within an economic bloc. Driscoll and Kraay’s nonparametric covariance matrix estimator is used to take care of cross-sectional dependence. The research outputs reveal that institutional quality complements and stimulates the growth benefits of financial development in Southern African countries. It is further established that institutional quality has to persistently be above the threshold of 6.08 on the ordinal scale of 10 point before institution can strongly stimulate and complement financial development to impact positively on growth. This study, therefore, recommends that there is an urgent need for Southern African countries to strengthen and improve the quality of institutions so as to maximize the growth benefits of financial development.

The paper hypothesizes that the quality of institutions tends to evolve slowly and in a piecemeal nature over time. In this process policy is seen to be a mechanism through which this evolutionary ...

Violent conflict such as civil war may influence institutional quality by changing the political equilibrium or by changing preferences and norms. This study presents empirical evidence that in some cases civil war deteriorates institutional quality. By applying the synthetic control method to 25 cases of civil war between 1960 and 2010, I construct the counterfactual path of institutional quality in the absence of civil war. The effects of civil war are heterogeneous, but for a substantial minority of cases civil war appears to deteriorate institutional quality. These findings have implications for post‐civil war economic recovery as well as long run economic development.

This study investigates how the enactment of regulations and laws dealing with climate change influences CO2 emissions. Using a sample of 83 countries and covering the period from 2003 to 2014, our dynamic panel analysis yields two major results. First, the enactment of new climate change regulations (i.e., amendments, decrees, orders) associated with a strong rule of law significantly diminishes CO2 emissions. This result validates the hypothesis of Gunningham (J Environ Law 23:169–201, 2011. https://doi.org/10.1093/jel/eqr006 ), which argues that the efficiency of environmental legislation must be supported by regulatory institutions that can efficiently enforce the law. Second, the enactment of new climate change laws seems to not impact emissions levels independently of institutional quality. It may be possible that private agents anticipate the entry into force of the new law(s) and must consequently adapt to the requirements of such laws, leading to a nonsignificant impact on CO2 emissions.

This study investigates the impact of foreign aid and remittance inflows on entrepreneurship progress in Africa. The role of institutional quality in the relationship between foreign aid and entrepreneurship is also investigated. We explore data of 19 African countries for a period of 2006–2017, and panel data regression techniques are employed. The study finds that: (1) Foreign aid impact on entrepreneurship is negative. (2) The remittances mediate the negative impact of foreign aid on entrepreneurship. (3) Institutional quality mediates the negative impact of foreign aid on entrepreneurial progress. (4) The threshold level of remittance at which foreign aid would meaningfully enhance entrepreneurship is 10.59 as a percentage of GDP while that of institutional quality is 5.04 on a scale of 10 point. (5) The role of remittances and foreign aids is complementary in firm start-up activities. (6) Institutional quality plays important roles in moderating impact of foreign aid on firm start-up activities. In addition, our results show that concentration in banking industry does not benefit entrepreneurial activities. The study concludes that foreign aids and remittances perform complementary roles in improving the level of entrepreneurial development in Africa. The strong institutional environment is very important in promoting entrepreneurial success. These findings are robust to alternative estimations.

We study the relation between trust and economic growth. We explore the history of the topic and conduct empirical analysis using all the available data from the World Values Survey and the European Values Study, including data for the recent years. We show that results of the classic models that establish positive relation between trust and economic growth do not replicate on the most recent data. Moreover, neither use of alternative indicators of trust, nor dividing the countries into the groups depending on institutional quality yields to the appearance of relation. We discuss possible reasons for the absence of relation between trust and economic growth in the recent years, in particular, the changing role of trust in the modern world, and point to the importance of more detailed exploration of the mechanisms of relation between trust and economic growth.

Empirical growth literature finds conflicting results on the relationship between public spending and long-run economic growth. This paper shows that the nature of relationship between the two variables depends upon the institutional quality of a country. Our empirical investigation relies upon OLS, fixed-effects and system-GMM estimators for a large panel of 113 developed and developing economies during the period 1981–2015. The main findings confirm that the adverse impact of public size on output growth holds only for countries with poor institutional quality. By contrast, when the institutional quality exceeds certain thresholds, the growth inhibiting effects of government size become insignificant. From the fiscal policy viewpoint, these outcomes imply that the productivity of public spending is more important than an excessively large public size of the country.

We examine the contribution of de jure and de facto institutional instability to long-run growth and development for a large panel of countries in the period 1820–2016. To this end, we extract the latent components of de jure and de facto instability of political institutions from several existing datasets. We distinguish between two types of instability where the positive type is associated with adaptive efficiency, while the negative type promulgates insecurity of property rights and institutional weakening. The evidence suggests that greater de jure and de facto institutional instability has a strong negative impact on income and growth, where de facto instability appears to be relatively more important than de jure instability. The negative effects of institutional instability operate independently of the positive effects of institutional quality, which implies that even second-best institutions are able to sustain a high-level growth path and economic development if they manage to maintain a minimum level of stability. The negative effects of greater institutional instability are robust across a variety of specification checks, and do not seem to be driven by sample selection bias. Instrumental variable estimates provide results with strong identification properties and suggest that the effect of institutional instability on long-run growth and development appears to be causal. Our instrumental variable estimates show that a modest increase in de facto instability is associated with 26 percent lower per capita income in the long run.