The role of institutions in cross-section income and panel data growth models: a deeper investigation on the weakness and proliferation of instruments

Vieira, F., MacDonald, R. and Damasceno, A. (2012) The role of institutions in cross-section income and panel data growth models: a deeper investigation on the weakness and proliferation of instruments. Journal of Comparative Economics, 40(1), pp. 127-140. (doi: 10.1016/j.jce.2011.09.004)

Abstract

This paper investigates the role of institutions in determining per capita income levels and growth. It contributes to the empirical literature by using different variables as proxies for institutions and by developing a deeper analysis of the issues arising from the use of weak and too many instruments in per capita income and growth regressions. The cross-section estimation suggests that institutions seem to matter, regardless if they are the only explanatory variable or are combined with geographical and integration variables, although most models suffer from the issue of weak instruments. The results from the growth models indicate that: there is mixed evidence on the role of institutions and such evidence is more likely to be associated with law and order and investment profile; government spending is an important policy variable; collapsing the number of instruments results in fewer significant coefficients for institutions.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: MacDonald, Professor Ronald and Vieira, Prof Flavio
• Authors: Vieira, F., MacDonald, R., and Damasceno, A.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Comparative Economics
• ISSN: 0147-5967
• Published Online: 03 October 2011