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The growth effects of economic and political institutions: new evidence from spatial econometrics analysis using historical-based institutional matrix

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  • Mahyudin Ahmad

    (Universiti Teknologi MARA (UiTM) Perlis Branch
    Universiti Teknologi MARA)

  • Stephen G. Hall

    (University of Leicester)

Abstract

This paper first proposes a theoretical framework outlining the links from the deep determinants of modern-day institutional environment towards the countries’ economic performance, and second tests these links to find the evidence of the spatial spillover effects of institutional proximity on economic growth. Utilizing spatial fixed effects estimation on a sample of 85 countries over a period 1990–2019, and measuring the countries’ spatial interdependence via both geographical and institutional proximities, this paper finds evidence on the presence of spillover effect of economic institutions and institutional proximity on countries’ growth process. Specifically, this paper shows that institutionally similar countries (i.e. countries with similar legal and colonial origins) would have greater spatial growth effects than countries that are geographically closer, and the results are robust to various model specifications. The novel finding is with regard to the unique spatial dimension of growth based on the concept of institutional proximity which imply that the policymakers must not ignore a country’s spatial interdependence; they must not be concerned with the development of institutional settings within their own country since there is a potential spillover effect of growth determinants from its neighbours, be it geographical or institutional.

Suggested Citation

  • Mahyudin Ahmad & Stephen G. Hall, 2023. "The growth effects of economic and political institutions: new evidence from spatial econometrics analysis using historical-based institutional matrix," Economic Change and Restructuring, Springer, vol. 56(2), pages 749-780, April.
    • Handle: RePEc:kap:ecopln:v:56:y:2023:i:2:d:10.1007_s10644-022-09440-1
    DOI: 10.1007/s10644-022-09440-1
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    More about this item

    Keywords

    Institutional proximity; Growth spillovers; Spatial panel estimation; Legal origin; Colonial origin;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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