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Rebundling Institutions

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  • Katja Kalkschmied

    (University of Graz, Austria)

Abstract

This study investigates the joint effects of legal property rights and contracting institutions on economic development. In a two-step panel estimation procedure that uses data of 130 countries over the period 2005-2015, I find that the long-term income effects of legal property rights institutions depend on the quality of legal contracting institutions. This supports the hypothesis that the two different types of institutions provide interrelated incentives and constraints on economic decisions and productive activities. According to the estimates, the marginal effects of increasing executive constraints are significantly higher in countries with a legal system that efficiently enforces private contracts. Further decomposing the interaction effect for groups of countries with different quality combinations reveals that the first of the two types of legal institutions matters for the size and direction of the interaction effect. In poor countries with absent or bad legal institutions, reforms considering only one single type can backfire.

Suggested Citation

  • Katja Kalkschmied, 2020. "Rebundling Institutions," Graz Economics Papers 2020-03, University of Graz, Department of Economics.
    • Handle: RePEc:grz:wpaper:2020-03
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    More about this item

    Keywords

    legal institutions; property rights; contracting; interrelated incentives; joint effects; economic development;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H13 - Public Economics - - Structure and Scope of Government - - - Economics of Eminent Domain; Expropriation; Nationalization
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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