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Sources for the Euro Crisis: Bad Regulation and Weak Institutions in Peripheral Europe

Author

Listed:
  • Jacopo Costa

    (University of Florence)

  • Roberto Ricciuti

    (Department of Economics (University of Verona))

Abstract

We analyze the relationship between the quality of political institutions (Worldwide Governance Indicators) and economic regulations (Doing Business indicators) and the economic performance in a panel of 37 European countries between 2001 and 2011. Our results show that the regulations of business environment have a linear effect on the level of GDP, while political institutions have a non-linear effect (U-shaped). Bad political institutions seem not important when the returns of capital accumulation are high, whereas when the gains from the latter are exhausted, political institutions become crucial for further growth. These results allow us to better understand the differences between peripheral and central countries in Europe, and to identify these pre-existing differences as a source of instability in the EMU.

Suggested Citation

  • Jacopo Costa & Roberto Ricciuti, 2013. "Sources for the Euro Crisis: Bad Regulation and Weak Institutions in Peripheral Europe," Working Papers 15/2013, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:15/2013
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    Cited by:

    1. Thomas Goda & Özlem Onaran & Engelbert Stockhammer, 2017. "Income Inequality and Wealth Concentration in the Recent Crisis," Development and Change, International Institute of Social Studies, vol. 48(1), pages 3-27, January.
    2. Goda, Thomas & Onaran, Özlem & Stockhammer, Engelbert, 2014. "A case for redistribution? income inequality and wealth concentration in the recent crisis," Greenwich Papers in Political Economy 14056, University of Greenwich, Greenwich Political Economy Research Centre.
    3. Servaas Storm & C.W.M. Naastepad, 2016. "Myths, Mix-ups, and Mishandlings: Understanding the Eurozone Crisis," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(1), pages 46-71, January.

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    More about this item

    Keywords

    European Monetary Union; Worldwide Governance Indicators; Doing Business; economic institutions; political institutions;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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