موسسات و توسعه اقتصادی: تجزیه و تحلیل علیت گرنجر از پنل شواهد داده

This study examines the causal relationship between institutions and economic development using a panel Granger causality test. The study incorporates two institutional datasets, the International Country Risk Guide (ICRG) and World Governance Indicators (WGI). The empirical results based on 60 countries show that there is a bi-directional causality between institutions and economic development. The findings also suggest that causality patterns between institutions and economic performance vary at different stages of income level. Better institutional quality fosters economic development in higher income countries, whereas economic development tends to enhance institutional quality in lower income countries.

Recently, the role of institutions in influencing economic development has become one of the more dynamic areas of empirical work in economics. North (1981) conceptualizes institutions as “a set of rules, compliance procedures, and moral and ethical behavioral norms designed to constrain the behavior of individuals in the interests of maximizing the wealth or utility of principals”. He further stated that institutional change shapes the way societies evolve through time and, hence, the direction of economic performance. Numerous empirical studies have provided convincing evidence to support the view that differences in institutions can have a major effect on economic development. For example, in a seminal study, Knack and Keefer (1995) highlight that the quality of bureaucracy, property rights, and the political stability of a country all contribute to positive economic growth.1

This study examines the causal effect between institutions and economic development using the panel Granger causality test, which takes into consideration panel heterogeneity. The sample consists of 60 countries which were further divided into four income groups, namely high income, upper middle income, lower middle income, and low income, to examine whether there are any structural differences. The empirical results suggest that the causality patterns between both variables are highly heterogeneous, whereas there is a bi-directional causality effect between both variables in the full sample countries. However, these findings also reveal that the Granger causality relationships are not uniform at different stages of income groups. Specifically, institutional quality leads to a process of economic development in higher income countries, whereas economic performance promotes institutional quality in lower income countries. Since the causal relationships between institutions and economic development are heterogeneous, it may be necessary to derive different policy recommendations for different income groups rather than formulating a policy that applies to all countries. Thus, policies aimed at growth should take into account different stages of development for different countries.